Light Reading
Deutsche Telekom invests almost EUR 30 billion over three years in the future of telecommunications

DT Ups Capex to 30B Euros

Light Reading
LR Mobile News Feed
Light Reading
12/6/2012
50%
50%

BONN, Germany -- The demand for broadband will continue to grow significantly both in mobile communications and in the fixed network. Deutsche Telekom is therefore substantially stepping up investments in broadband networks and products over the coming three years in order to improve its competitive position in the long term. Group capex including MetroPCS is to grow to around EUR 9 to 10 billion, bringing the total up to almost EUR 30 billion. The focus is on Germany, where activities will center around building out the LTE network as well as rolling out optical fiber and vectoring technology in the fixed network. On top of that, a hybrid solution is planned for launch that combines LTE and vectoring, thereby increasing bandwidths. In the U.S., the roll-out of the national LTE network is on the agenda. In addition, T-Mobile USA has entered into an agreement with Apple to bring products to market together next year.

At its Capital Markets Day in Bonn, Deutsche Telekom also announced its overall planning which factors in this period of higher investments, and a free cash flow guidance for 2013 of around EUR 5 billion from which a dividend of 50 euro cents is to be paid out both in 2013 and in the following year. Free cash flow of around EUR 6 billion is targeted for 2015. Deutsche Telekom forecasts adjusted EBITDA of around EUR 17.4 billion for 2013. Once the MetroPCS deal is closed in the first half of 2013 as planned, this figure – on a pro-forma basis assuming the inclusion of MetroPCS from the beginning of the year – will increase to EUR 18.4 billion. The Group's net revenue and adjusted EBITDA are scheduled to grow again from 2014. The Board of Management has approved the corresponding planning and passed it on to the Supervisory Board for resolution along with a recommendation to that effect from the Finance and Audit Committees.

"Hesitation now means playing catch-up later. We are investing in the future – with resolve and a clear strategy," said René Obermann, Chairman of the Board of Management of Deutsche Telekom. "The investment plans we have presented today will lay the foundation for future growth. And it is the people in Germany in particular who will benefit more than ever from the modern infrastructure."

"These investment plans will ensure Deutsche Telekom remains absolutely sound and reliable over the long term," added CFO Timotheus Höttges. "We are going against the flow with our high investments in these times of economic challenges – because we have worked hard to establish sound balance sheet ratios and now have the necessary leeway. Our dividend planning offers our investors both an attractive return and planning reliability."

With clear statements regarding targeted financial ratios – net debt to adjusted EBITDA is to stay between 2 and 2.5, and a liquidity reserve that at a minimum is able to cover all maturities of the next 24 months – the Group intends to keep its A-/BBB rating and safeguard unrestricted access to the capital market. Along with a two-year dividend proposal for 2013 and 2014, looking ahead beyond the period of increased investments, the shareholder remuneration policy will be considered again from 2015. The plan is to give shareholders the choice of a dividend in kind or a cash dividend. This gives investors the opportunity to leave funds in the company, to improve financial ratios further and to benefit even more from the success of their investment in the long term. "We are pioneers of this innovative solution in Germany," said Chief Financial Officer Timotheus Höttges. Both the cash dividend and the share-based dividend in kind is tax-free for investors resident in Germany. All statements relating to dividends are subject to resolutions by the relevant boards and committees as well as the shareholders' meeting.

The finance strategy continues to focus on absolute transparency and reliability; a strategy that, in the period since 2010, has already generated a total return (dividend plus share price performance) for investors of 11.2 percent, clearly outperforming other former state-owned telecommunications industry monopolists across Europe. It contributes to the Group strategy of transforming the company from a "telco" to a "telco plus". Options for changes to the portfolio are also examined as part of the finance strategy, in particular the possibility of Everything Everywhere going public, as well as the strategic evaluation of the Scout group.

High-speed Internet access on a scale never seen before – this is the goal of Deutsche Telekom for its domestic market. The key aspects are:

  • Acceleration of the LTE build-out in order to have 85 percent of the population covered by 2016 with data transmission rates of up to 150 Mbit/s.
  • Build-out of the optical fiber network (FTTC) to cover around 65 percent of the population within the same time frame, thereby enabling more coverage than the cable network operators. Deployment of the new vectoring technology, provided a corresponding regulatory framework is in place, will increase VDSL data transmission rates to up to 100 Mbit/s.
  • In future, innovative hybrid-box technology will feed traffic in both directions via vectoring and LTE. This will make download speeds of up to 200 Mbit/s possible and upload speeds of up to 90 Mbit/s.


Investments in Germany from 2014 through 2016 are to increase to EUR 4.1 to 4.5 billion, respectively, compared with an average of EUR 3.6 billion in the preceding three years. In addition to increasing overall investments in Germany, expiring investments in other areas free up additional funds to drive ahead restructuring and innovation, bringing the total capital expenditure in connection with the integrated network strategy for optical fiber and vectoring in these areas to around EUR 6 billion. Deutsche Telekom's approach is based on the assumption that the about-face in European regulatory policy recently announced will be adopted in national regulation.

By the end of 2014, the Company aims to have stabilized revenue in Germany compared to 2013. The increased capital expenditure is intended to lay the foundation for compensating for the decline in revenues from traditional fixed-network and mobile telephony as well as text messaging. Bundled products, Entertain and cloud solutions are expected to drive revenues in the growth areas of mobile Internet and connected home in particular. This is to bring the adjusted EBITDA margin to around 40 percent. Deutsche Telekom intends to be the number one both in terms of mobile service revenues and the number of broadband lines, with market shares of 35 percent and 43 percent, respectively.

In the United States, capital expenditure of around USD 4.7 billion has been planned for 2013 and around USD 3 billion in each of the two subsequent years compared with USD 2.7 billion per year on average from 2010 to 2012. The focus in the U.S. is on building out the LTE network, which alone will result in capex of around USD 4 billion. T-Mobile USA is now in an extremely good position to benefit from growth, in particular of mobile Internet in the U.S., thanks to the mobile licenses it received from AT&T following the termination of the sale agreement, the spectrum from the Verizon deal, and the improved financial structure as a result of the long-term cell tower deal with Crown Castle.

In addition, T-Mobile USA benefits from the agreement with MetroPCS to combine their operations, a move designed to strengthen T-Mobile USA's standing in the fast-growing prepay segment. Approval is currently being sought from several U.S. authorities. Deutsche Telekom still expects the deal to close in the first half of 2013.

In the coming year, T-Mobile USA will continue to reinforce its market presence with additions to its rate plan and product portfolio, including Apple products. "Following on from the preceding steps such as the spectrum swap with Verizon, the towers deal with Crown Castle and the transaction with MetroPCS that we have announced, we have now added the final piece to the jigsaw to boost the competitiveness of T-Mobile USA sustainably," said René Obermann.

T-Systems marked a significant milestone in July with the launch of the Telekom IT unit, where the Group's internal IT activities in Germany are now pooled. The aim of the new unit is to sustainably reduce the Group's IT costs by EUR 1 billion by 2015. In external business, T-Systems is focusing even more squarely on cloud-based solutions. Experts are forecasting annual average growth rates in this market of 17 percent through 2017, which is significantly higher than the 2 percent annual growth rate projected for the traditional ICT business. Profitability is to improve by means of focusing on growth markets, enhancing standardization, and intensifying the use of capacities in low-wage countries (offshoring). The adjusted EBIT margin of the market unit is expected to grow to 4 percent by 2015.

In the Europe operating segment stronger collaboration across the national companies under the One DT Europe program aims to leverage economies of scale by centralizing shared tasks. Revenue is expected to grow moderately again from 2014 on an organic basis – i.e., excluding the effects of exchange rates, special taxes, and regulation. This growth will see a revenue mix that continues to shift towards the growth markets of B2B/ICT, mobile data, and TV business. One example of this is the mobile payment solution recently launched in Poland that is also to be rolled out at other Group companies. Deutsche Telekom is also planning further network partnerships in addition to those already in place in the United Kingdom, the Czech Republic, and Poland.

This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward-looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, depreciation and amortization, cash flows and personnel-related measures. They should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. Among the factors that might influence our ability to achieve our objectives are the progress of our workforce reduction initiative and other cost-saving measures, and the impact of other significant strategic, labor or business initiatives, including acquisitions, dispositions, business combinations, and our network upgrade and expansion initiatives. In addition, stronger than expected competition, technological change, legal proceedings and regulatory developments, among other factors, may have a material adverse effect on our costs and revenue development. Further, the economic downturn in our markets, and changes in interest and currency exchange rates, may also have an impact on our business development and the availability of financing on favorable conditions. Changes to our expectations concerning future cash flows may lead to impairment write downs of assets carried at historical cost, which may materially affect our results at the group and operating segment levels. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, our actual performance may materially differ from the performance expressed or implied by forward-looking statements. We can offer no assurance that our estimates or expectations will be achieved. Without prejudice to existing obligations under capital market law, we do not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise.

In addition to figures prepared in accordance with IFRS, Deutsche Telekom also presents non-GAAP financial performance measures, including, among others, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted net income, free cash flow, gross debt and net debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.

Deutsche Telekom AG (NYSE: DT)

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Custom TV
Using Service Quality to Drive WiFi Monetization

10|22|14   |   6:51   |   (0) comments


Live from the SCTE conference: Heavy Reading's Alan Breznick explores the forces shaping the WiFi opportunity in an interview with CableLabs' Justin Colwell and Amdocs' Ken Roulier.
LRTV Custom TV
Distributed Access Architectures – 2

10|21|14   |   8:51:00 AM   |   (0) comments


ARRIS CTO Network Solutions Tom Cloonan discusses why many if not most MSOs will continue with integrated CCAP, while addressing why some are also looking at two futuristic, distributed access architectures: Remote PHY and Remote CCAP.
LRTV Custom TV
Distributed Access Architectures – 1

10|21|14   |   9:01   |   (0) comments


SCTE Sr. Director of Engineering Dean Stoneback discusses the pros and cons of distributed access architecture (DAA) and its various forms, which range from basic Remote PHY to full CMTS functionality in the node.
LRTV Custom TV
The WiFi Road to Riches – 2

10|21|14   |   3:58   |   (0) comments


ARRIS Senior Solution Architect Eli Baruch talks about how MSOs can enable public and community WiFi through 1) outdoor access points, 2) businesses seeking to offer WiFi to customers, and 3) residential WiFi gateway extensions.
LRTV Custom TV
The WiFi Road to Riches – 1

10|21|14   |   10:15   |   (0) comments


SCTE Director of Advanced Technologies Steve Harris discusses WiFi deployments, drivers, challenges and advances, including 802.11ac, carrier-grade WiFi, community WiFi, Hotspot 2.0, Passpoint, WiFi-First and voice-over-WiFi.
LRTV Custom TV
Advantech Accelerates 100G Traffic Handling

10|17|14   |   7:56   |   (0) comments


Paul Stevens from Advantech explains why handling 100GbE needs a whole new platform design approach and how Advantech is addressing the needs of equipment providers and carriers to give them the flexibility and performance they will need for SDN and NFV deployment.
LRTV Huawei Video Resource Center
Holland's Imtech Traffic & Infra Discusses Huawei's ICT Solution and Services

10|16|14   |   4:49   |   (0) comments


Dimitry Theebe is from the business unit at Imtech Traffic & Infra which delivers communications solutions for transportations. His partnershp with Huawei began about a years ago. In this video, Theebe speaks more about this partnership and what he hopes to accomplish with Huawei.
LRTV Huawei Video Resource Center
Huawei's Comprehensive Storage Solutions Vital for SVR

10|16|14   |   6:16   |   (0) comments


SVR Information Technology provides cloud services for academic and special sectors. With Huawei's support, SVR and Yildiz Technical University has established Turkey's largest and most advanced High Performance Computing system. CSO Ismail Cem Aslan talks about what he hopes Huawei's OceanStor storage system will bring for him.
LRTV Huawei Video Resource Center
Mexico's Servitron's Impression of Huawei at CCW 2014

10|16|14   |   6:35   |   (0) comments


Servitron is a network operator in Mexico that has been in the trunking industry for the past 20 years. Its COO, Ing. Ragnar Trillo O., explains at Critical Communications World 2014 that his company has been interested in the long-term evolution of LTE technology and its adoption for TETRA.
LRTV Huawei Video Resource Center
Building a Better Dubai

10|16|14   |   2:06   |   (0) comments


Abdulla Ahmed Al Falasi is the director of commercial affairs, a telecommunications coordinator for the government of Dubai. Their areas of service span across multiple industries, including police, safety, shopping malls and more. In this video, Abdulla talks about his department's work with Huawei.
LRTV Huawei Video Resource Center
Huawei Lights Up Malaysia Partner Maju Nusa

10|16|14   |   1:59   |   (0) comments


Malaysia's Maju Nusa is an enterprise partner to Huawei in networking, route switches and telco equipment. At this year's Critical Communications World in Singapore, CTO Pushpender Singh talks about what Huawei's eLTE solutions mean to his company and for Malaysia.
LRTV Custom TV
Evolving From HFC to FTTH Networks

10|15|14   |   2:19   |   (0) comments


Cisco's Todd McCrum delves into the future of cable's HFC plant, examining how DOCSIS 3.1 and advanced video compression will extend its life and how the IP video transition will usher in GPON and EPON over FTTH.
Upcoming Live Events
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
WhoIsHostingThis.com presents six of the world's most extreme WiFi hotspots, enabling the most epic selfies you can imagine.
Hot Topics
Google: Carriers & Cloud Providers Need to Cooperate
Mitch Wagner, West Coast Bureau Chief, Light Reading, 10/16/2014
Could Data Be the New 'Currency'?
Ray Le Maistre, Editor-in-chief, 10/16/2014
iPad Air 2 Lets Users Switch Carriers Any Time
Mitch Wagner, West Coast Bureau Chief, Light Reading, 10/17/2014
Analysts Warn of Major NFV Gaps
Carol Wilson, Editor-at-large, 10/22/2014
CBS Takes OTT Plunge
Mari Silbey, Independent Technology Editor, 10/16/2014
Like Us on Facebook
Twitter Feed