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Finance strategy

We announced our finance strategy for the years 2021 through 2024 at the Capital Markets Day in May 2021. Deutsche Telekom continues to pursue an attractive and reliable finance strategy. Through 2024, we want to further raise our forecast for growth from the past few years.

For further information on the expected business development up to 2024, please refer to the section “Forecast.”

At the Capital Markets Day in 2021, we communicated the following ambition levels for the period through 2024:

Finance strategy: Ambition levels (graphic)
a Before dividend payments and spectrum investment.
b Our ambition level was determined in the 2020 financial year based on the average U.S. dollar exchange rate at the time of USD 1.14.
c Compound annual growth rate.

We also expect revenue to increase by an average of 1 to 2 % per year and adjusted EBITDA AL by an average of 3 to 5 %. Based on the results generated in 2021 and 2022, as well as our forecast for 2023, we believe we are on the right path to achieve these targets.

Another part of our finance strategy is to achieve our target financial ratios – relative debt (ratio of net debt to adjusted EBITDA) and equity ratio – along with a liquidity reserve that covers our maturities of the coming 24 months at least. With these clear statements we intend to maintain our rating in a corridor from A- to BBB and safeguard undisputed access to the capital market.

There is a sustainable dividend policy for shareholders, which is subject to approval by the relevant bodies and the fulfillment of other legal requirements. Starting from the 2021 financial year, 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. For the 2022 financial year, as announced in November 2022, we intend to propose a dividend of EUR 0.70 for each dividend-bearing share. This equates to 38 % of adjusted earnings per share. As adjusted earnings per share benefited from a large number of positive one-time effects in the reporting year in connection with the measurement of derivatives – in particular from the forward transaction to hedge the price of acquiring shares in T‑Mobile US in the future, and the stock options to purchase shares in T‑Mobile US – as well as income from the measurement of provisions as a result of the sharp rise in interest rates, we consider our proposed dividend to be consistent with our dividend policy, which is based on the long-term sustainable earnings trend. We thus offer our shareholders both an attractive return and planning reliability. As in previous years the dividend for the 2022 financial year will once again be paid out without deduction of capital gains tax.

We will also take share buy-backs into consideration.

Total capital expenditure is also to remain high in the next few years. The scope for investment is to be used to further roll out our broadband infrastructure and to accelerate the transformation of the Company. In mobile communications, the infrastructure build-out will focus on the LTE and 5G standards and, in the fixed network, mainly on our accelerated fiber-optic build-out. The finance strategy supports the transformation of our Group into the Leading Digital Telco. In order to generate a sustainable increase in value, we intend to earn at least our cost of capital. We plan to meet this target by optimizing the utilization of our non-current assets on the one hand, and pursuing strict cost discipline and profitable revenue growth on a sustainable basis, on the other.

Our finance strategy through 2024

Our finance strategy through 2024 (graphic)
a Subject to approval by the relevant bodies and the fulfillment of other legal requirements.
b Deviation from the target range for a short period as a result of the business combination of T‑Mobile US and Sprint until year-end 2024.

In order to set and achieve our strategic goals more effectively, we pursue a Group-wide, value-oriented performance management approach, which we explain in the following section.

Refers to the mobile communications standard launched in 2020, which offers data rates in the gigabit range, mainly over the 3.6 GHz and 2.1 GHz bands, converges fixed-network and mobile communications, and supports the Internet of Things.
AL – After Leases
Since the start of the 2019 financial year, we have taken the effects of the first-time application of IFRS 16 “Leases” into account when determining our financial performance indicators. “EBITDA after leases” (EBITDA AL) is calculated by adjusting EBITDA for depreciation of the right-of-use assets and for interest expenses on recognized lease liabilities. When determining “free cash flow after leases” (free cash flow AL), free cash flow is adjusted for the repayment of lease liabilities.
LTE – Long-Term Evolution
4G mobile communications technology that uses, for example, wireless spectrum on the 800 MHz band freed up by the digitalization of television. Powerful TV frequencies enable large areas to be covered with far fewer radio masts. LTE supports speeds of over 100 Mbit/s downstream and 50 Mbit/s upstream.