In 2021, we adjusted our Group strategy after seven years and set ourselves a new ambition: Leading Digital Telco. And we remain very successful on the market: Deutsche Telekom is by far the leading telecommunications company in Europe in terms of market capitalization, revenue, and earnings (adjusted EBITDA AL) (as of December 31, 2022). Our Group continues to grow, as confirmed by our most important financial performance indicators. We raised our full-year guidance for 2022 as many as three times in the course of the year (in terms of adjusted EBITDA AL, free cash flow AL (before spectrum), and adjusted earnings per share). Understanding of the strategy and support for it among the workforce remain at a record high level of 81 % (pulse survey in November 2022) and in fact increased by another 2 percentage points compared with the prior year. However, few if any industries face change on the same scale as the telecommunications industry. And digitalization is the central catalyst for the key trends that have a long-term impact on our ecosystem:
Data traffic continues to grow worldwide, driven by the quickening pace of digitalization in many aspects of personal and professional life. Correspondingly, demand for high-speed broadband – over the fixed and mobile networks – is also on the rise. According to forecasts by Ericsson, average data use worldwide per smartphone will increase from 9.1 GB per month in 2020 to more than 19 GB per month in 2023, while the number of fixed wireless access connections to the internet will increase globally from 72 million in 2020 to more than 131 million in 2023.
Digitalization is shaping demand among consumers and business customers alike: Consumers want their product and service experiences to be fully customized to their personal needs, context-sensitive, and to work seamlessly. For business customers, requirements are driven by the new way of working: digital, hybrid, and app-centric. They expect secure connectivity as well as flexible service and product models that integrate easily and securely into workflows – and all from a single source and “as a service.”
We are seeing companies from other industries pushing onto the market with lean, software-defined production models. Providers such as Google, Microsoft, and Amazon Web Services are expanding into the global connectivity field and increasingly providing network functions in their cloud environments. More and more, they are positioning themselves as vendors of connectivity services not only to telcos, but also as partners for business customers.
CPaaS (communications platform as a service) companies offer user-friendly communications services on their own communications platform – without having their own networks. They provide developers and business customers with standard telecommunications services (calls, text messages) and new network functions through standardized application programming interfaces (APIs). Network connectivity for this is guaranteed through wholesale agreements with telecommunications companies. This shifts access to end customers from telcos to the CPaaS companies.
Alternative network providers and technologies (e.g., satellite connectivity) are gaining in relevance and can be an opportunity to extend terrestrial telecommunications networks (e.g., network coverage in sparsely populated areas). But continued fragmentation in the connectivity market also brings ever-greater complexity. Especially among business customers with international footprints, demand is growing for a one-stop shop offering global network orchestration and a network customized to individual business cases.
At the same time, the parallel build-out of broadband and mobile infrastructure (optical fiber, 5G) calls for telecommunications companies to commit to high investments and find innovative approaches to implementation, for instance by using third-party infrastructure or partnering with investors.
Sustained global population growth, and growing resource consumption are putting a strain on available resources. It is thus imperative that we find a sustainable, more ecological way of doing business and act with a greater focus on social responsibility. At the same time, geopolitical tensions in consideration of the globalized world economy and the increasing use of digital technologies are creating supply chain bottlenecks and putting guaranteed access to network components and energy supply at risk.
The acquisition of new skills and expertise is another vital aspect of digital transformation. The challenge here lies in quickly building up a critical mass of digital talent. Flexible work models, global recruitment processes, and responsible corporate action are gaining relevance.
In the Western tech-sphere, we are well positioned to implement our Leading Digital Telco strategy. No other telecommunications company has a comparable footprint with its own networks on both sides of the Atlantic: in Europe and the United States. We are a global enterprise with a considerable presence in Europe, European roots and values, and an extremely strong business in the United States. Our goal is clear: we want to align ourselves long-term with the needs of our customers and transform ourselves into a digital company to hold our own against new competitors and continue our growth course. Our future growth is based on three pillars: “Lead in digital life & work,” “Lead in business productivity,” and “Magenta Advantage.” Building and operating the best convergent networks remains at the core of our strategy and is an important driver for our growth areas. We want to “build and scale the telco as a platform” and we are investing both in our network infrastructure and in establishing cloud-based service platforms. We leverage our international footprint to generate synergies across the Group and to carry weight alongside the global tech giants.
The two areas of operation, “Save for growth investments” and “Simplify, digitalize, accelerate & act responsibly,” support our growth target and provide the guidelines for our actions. Our Group strategy does not aim to micromanage all local units, but to provide a strategic framework and to utilize local strengths (networks, competitive standing). We measure the success of our strategy on the one hand by means of specific digitalization targets: by 2024, for example, we want to increase the first time right rate in the provision of broadband lines in Germany and Europe to at least 95 % and reduce the time to market in IT to two months in Germany and to one month in Europe. On the other hand, success can be seen in our long-term competitiveness and as such is reflected in the established key financial figures: Recently, at the 2021 Capital Markets Day, we set an annual growth target (Group CAGR) of 1 to 2 % for revenue and 3 to 5 % for adjusted EBITDA AL by 2024.
For further information on our ambition levels, please refer to the section “Finance strategy.”
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Group strategy: Leading Digital Telco
Lead in digital life and work
Lead in business productivity
The best connectivity experience: we offer our customers the best network, anytime, anyplace – whether at home, on the go, or at work, it is to work seamlessly and across all technologies. That’s why we market fixed-line and mobile connectivity as one in our convergent products (FMC).
We want to reach
FMC households in Germany and Europe by 2024.
Being there for our customers with the best networks and perfect service. With the “+,” our network is becoming more tangible, for example, with MagentaTV, smart home, and our own operating system HomeOS as a “linking element” for the digital household.
for our customers
Perfect customer service supported by digitalization: we are investing in the further development of our service tools and place great importance on finding a quick solution to our customers’ issues.
Turn customers into fans
With our infrastructure and worldwide partnerships in mobile communications and fixed network, we make sure our network is available worldwide, providing our business customers with all kinds of connectivity and collaboration services – reliable and secure.
based on our own and third-party infrastructure
First-choice partner for our business customers’ digital transformation: we focus on offering integrated services (combining fixed, mobile, and IT), further strengthening our portfolio in the IT field, and supporting our business customers in digitalizing their companies.
“All from a single source” also applies to our B2B portfolio: we offer our business customers all of the telecommunications, collaboration and digitalization services they need.
CAGR in B2B revenue
in Germany and Europe
New digital business models in addition to a strong core business: We have an enormous reach. Using this reach, we do not only want to market our own offerings, but our partners’ too – thus creating new business models alongside our core business.
mobile customers, > 8 million TV customers, > 8,000 shops
Our customers are given access to exclusive offers via our channels (e.g., OneApp). Our partners can bring their new services to a wider audience more quickly too. This means we continue improving loyalty among our customers while getting a cut of our partners’ revenue.
When all three of these come together...
...everyone is happy.
Build & scale Telco as a platform
Cloud-based customer and network-service platforms
We are adjusting our production platform to suit the customer needs of the future: To this end, we are building cloud-based, scalable, modular platforms to enable shorter development times, increasingly automated and cost-effective production, and an improved customer experience.
Modular and scalable services...
...with access via open interfaces
Connectivity, services, and data (e.g., location data, connection conditions, and user behavior) can also be accessed by third parties (e.g., service providers and app developers) via APIs and can thus be integrated into new applications – similar to the app store principle.
for selected network functions
With 5G, we have created the best Deutsche Telekom mobile network of all time. With even greater performance and speed, it offers entirely new opportunities since the high bandwidths guarantee more stability and capacity. This allows our customers to enjoy video chats, streaming, and online shopping without any jerkiness or buffering.
By the end of 2025
is to cover 99 % of people in Germany.
By 2024, we want to step up our build-out activities even further and from then on connect over 2.5 million households per year with optical fiber in Germany as well as more than 1 million households per year in Europe.
By 2024, we will be ramping up the fiber-optic build-out to
> 2.5 million
households per year in Germany.
Customers should be able to use their services whenever, wherever – regardless of the underlying transmission technology. Since there are more and more alternative infrastructure providers around, we are combining their infrastructure (e.g., satellite) with ours to create an overarching “network of networks” which we will manage and ensure secure data transmission across networks.
We’re building and orchestrating the
NETWORK of NETWORKS
and complementing our infrastructure with that of selected partners.
Save for growth investments
Future growth requires sufficient investment: we are continuing to invest in our networks and our own capacity to innovate, while also successfully integrating innovations from outside. We are enhancing our efficiency by increasingly using scalable platforms and services.
In 2022 we are investing
first and foremost into building and operating networks.
Digitalize, digitalize, digitalize: customer interfaces, networks, IT, and processes – we are digitalizing everything, end to end. The digitalization of our core business is helping us to improve customer experience and enhance our efficiency.
By 2024 we want our
of our customers in Europe.
We are systematically expanding our expertise in innovative technologies like artificial intelligence for the sake of our digital transformation. Data-based analyses are already helping us to maintain our hardware more proactively, understand customer needs better, and manage our networks more efficiently.
We are investing in
and automation to improve customer experience and enhance efficiency.
Our societal responsibility forms the basis for our corporate actions. We want to achieve net zero in our direct operations by 2025 and along our entire value chain by 2040. We are committed to digital participation, privacy, and security as well as respectful behavior online based on democratic rules.
The volume of emissions we intend to be responsible for is:
None at all! No small print. And we want to achieve this target by 2040.
Group strategy: Leading Digital Telco
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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.
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.