Expectations for the Group

Expectations up to 2023. We expect profitable growth to continue over the next two years. This will provide a sound basis for achieving our financial ambitions – as communicated at our Capital Markets Day in May 2021.

We expect our financial performance indicators to develop as follows in 2022 and 2023:

• Net revenue is projected to remain stable year-on-year in 2022 and to increase slightly in 2023. This trend will be influenced in particular by the United States operating segment, which is also expected to report a stable trend in 2022 and a slight increase in 2023. In the United States, the forecast period will be negatively impacted by the withdrawal from the business model of terminal equipment leases and lower revenue in the wholesale business. In the Germany operating segment, revenue is expected to increase slightly in 2022 and to increase in 2023.
• Service revenue is projected to slightly increase year-on-year in both 2022 and 2023. In the United States operating segment, after an increase in 2022, this metric is expected to increase slightly in 2023.
• Adjusted EBITDA AL is expected to come in at around EUR 36.5 billion in 2022 and to increase in 2023. In the next two years, adjusted EBITDA AL will also be negatively affected by the gradual exit from the business model of terminal equipment leases in the United States, with revenues from terminal equipment leases being offset primarily by the depreciation of the capitalized terminal devices on the expenses side. Terminal equipment leases were a major pillar, in particular, at Sprint. In its place, marketing activities are set to shift increasingly toward terminal equipment sold under installment plans.
• We expect adjusted core EBITDA AL to increase year-on-year in 2022 and then again in 2023. Adjusted core EBITDA AL is distinguished by excluding revenue from terminal equipment leases in the United States from adjusted EBITDA AL, thereby presenting operational development undistorted by the withdrawal from the terminal equipment lease business. For this reason, we are adding adjusted core EBITDA AL to our financial performance indicators for the years of the withdrawal from the business model of terminal equipment leases in the United States for explanatory purposes.
• EBIT is expected to increase sharply year-on-year in 2022 and 2023. This is based on the positive development of adjusted core EBITDA AL. While 2022 will additionally benefit from income relating to the sale of T‑Mobile Netherlands, 2023 will include effects from the reduction in integration costs in connection with the business combination of T‑Mobile US and Sprint.
• ROCE is expected to increase slightly in 2022 and significantly in 2023. Hence, we expect to achieve our target for ROCE to be higher than the expected weighted average cost of capital (WACC) again in 2023, following a briefly increased burden until 2022 from the integration costs arising from the business combination of T‑Mobile US and Sprint.
• Our investments – measured in terms of cash capex (before spectrum investment) – are expected to amount to around EUR 19.3 billion in 2022 and include higher investments for the accelerated 5G build-out in the United States operating segment. In 2023, cash capex (before spectrum investment) is expected to decrease substantially. We want to continue investing heavily in building out our network infrastructure in Germany, the United States, and Europe in order to safeguard our technology leadership in the long term.
• Free cash flow AL (before dividend payments and spectrum investment) is expected to reach around EUR 10 billion in 2022. We also expect a strong increase in free cash flow AL in 2023 due to good operational development. For business outside of the United States, we expect free cash flow AL of EUR 3.7 billion for 2022. Free cash flow AL outside of the United States in 2021 was EUR 3.9 billion; on a like-for-like basis, i.e., adjusted for comparability with the forecast for free cash flow AL outside of the United States for 2022, it stood at EUR 3.5 billion.
• At the end of 2021, we had the following ratings: BBB with a stable outlook (Standard & Poor’s – S&P); BBB+ with a stable outlook (Fitch); and Baa1 with a stable outlook (Moody’s). Maintaining an investment grade rating within the A– to BBB range will enable us to retain access to the international capital markets and is thus a key component of our finance strategy.
• We expect a slight increase for our earnings per share (adjusted for special factors) in 2022. We expect to see adjusted earnings per share increase sharply in 2023.

Our debt issuance program puts us in a position to place issues in the international capital markets at short notice, while our commercial paper program enables us to issue short-term papers in the money market. T‑Mobile US is being refinanced primarily in the form of senior secured and unsecured notes.

Bonds and loans in the total amount of EUR 7.0 billion and EUR 7.8 billion will fall due for repayment in 2022 and 2023, respectively. A number of T‑Mobile US bonds include issuer termination rights. If the premature termination and refinancing of these bonds result in economic gains, this could give rise to further refinancing requirements. We plan to issue new bonds in various currencies. The exact financing transactions will depend on developments in the international finance markets. We also intend to cover part of our liquidity requirements by issuing commercial paper.

We want to continue leveraging economies of scale and synergies through suitable partnerships or appropriate acquisitions in our footprint markets. There are no plans, however, to expand into emerging markets. We will continue to subject our existing partnerships and equity investments to regular strategic reassessments with a view to maximizing the value of our Company.

Our expectations for the period until 2023 for the Group and the operating segments as regards our financial and non-financial performance indicators are shown in the following tables. They assume a comparable consolidated group and constant exchange rates. If the economic situation should deteriorate or any unforeseen state or regulatory interventions arise, the expectations expressed here may change accordingly. Given the level of macroeconomic uncertainty, for instance in the context of the continuation of the coronavirus pandemic, we cannot rule out the possibility of deviations either. All trends denote year-on-year changes. To indicate the intensity and trends of our forecasts, we apply the following assessment matrix: strong decrease, decrease, slight decrease, stable trend, slight increase, increase, strong increase.

For further information on the development of the non-financial performance indicators of our operating segments, please refer to the section “Expectations for the operating segments.”

In both 2022 and 2023, we intend to achieve a moderate improvement in customer loyalty/satisfaction – which is measured using the TRI*M index performance indicator.

Having achieved a high level of 77 points – on a scale of 0 to 100 – on the engagement score in the 2021 employee survey, and in view of the results of the pulse surveys conducted in 2021, we expect the positive response of our employees regarding our Company to remain stable in the next pulse surveys in 2022 and 2023.

We plan to maintain energy consumption at a stable level in 2022 and 2023. We expect CO₂ emissions (Scope 1 and 2) to decline slightly over the next two years, since the energy consumption of all Group units has been covered entirely by electricity from renewable energy sources since 2021 and, as such, the majority of emissions have already been eliminated.

For further information on our ESG KPIs, please refer to the section “Corporate responsibility and non-financial statement.”

Our planning is based on the following exchange rates:

Expectations for Deutsche Telekom AG. The development of business at Deutsche Telekom AG, the Group’s parent company, is reflected particularly in its service relationships with its subsidiaries, the results of the subsidiaries’ domestic reporting units, and other income from subsidiaries, and from associated and related companies. In other words, our subsidiaries’ results from operations and the opportunities and challenges they face are key factors shaping the future development of Deutsche Telekom AG’s figures. Accordingly, in addition to our expectations for the Group, the expectations described on the following pages concerning the operating segments’ revenue and earnings – such as strong competition, regulatory intervention, market and economic expectations, etc. – have an impact on our expectations concerning the development of Deutsche Telekom AG’s future income after taxes.

For the 2021 financial year, we will propose a dividend of EUR 0.64 for each dividend-bearing share. Since 2021, subject to approval by the relevant bodies and the fulfillment of other legal requirements, the amount of the dividend is based on a dividend payout ratio of 40 to 60 % of adjusted earnings per share, with a lower limit fixed at EUR 0.60 per dividend-bearing share.