Expectations for the Group

Expectations up to 2025. 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 2024 and 2025 on an organic basis, i.e., on a like-for-like basis with the prior year:

• We expect revenue to increase both in 2024 and in 2025 on the back of the positive development of service revenue. The primary driver of this trend will be the United States operating segment, where we likewise expect revenue to grow in both 2024 and 2025. We expect revenue in the Germany and Europe operating segments to increase slightly in both 2024 and 2025.
• Service revenue is projected to increase in both 2024 and 2025. This trend will be influenced by the growth expected in the United States operating segment for 2024 and 2025. In the Germany and Europe operating segments, we expect a slight increase in both 2024 and in 2025.
• Adjusted EBITDA AL is expected to increase to around EUR 42.9 billion in 2024 and to increase substantially in 2025. In particular, revenue and the realization of synergies from the business combination of T‑Mobile US and Sprint will have a positive impact. The gradual withdrawal 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, is expected to be almost completed from 2024. The resulting impact on the development of adjusted EBITDA AL will therefore only be minimal in 2024. Terminal equipment leases were a major pillar, in particular, at Sprint. In its place, marketing activities have shifted increasingly toward the Equipment Installment Plan.
• We expect adjusted core EBITDA AL to increase substantially in both 2024 and 2025, driven by the realization of synergies from the business combination of T‑Mobile US and Sprint. Adjusted core EBITDA AL is distinguished by excluding revenues 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 model. 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 – likely for the final time.
• We anticipate a sharp decrease in profit/loss from operations (EBIT) in 2024 followed by a sharp increase in 2025. Expected EBIT will benefit overall from the positive trend in adjusted EBITDA AL, developing accordingly. However, it is expected to decline initially in 2024 – on account of the large positive effect recorded in 2023 due to the income from the sale of shares in GD Towers that has been recognized as a special factor.
• ROCE is expected to decrease significantly in 2024 before rising again sharply in 2025, due to the effects described for the development of EBIT. We expect to achieve our target for ROCE to be higher than the expected weighted average cost of capital (WACC) for future years, following the increased burden 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 investments) – are expected to decline to around EUR 15.9 billion in 2024 on account of the largely completed network integration in connection with the business combination with Sprint in the United States. In 2025, cash capex (before spectrum investment) is expected to remain stable. 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 increase significantly to around EUR 18.9 billion in 2024. We also expect a further strong increase in free cash flow AL in 2025 due to sound operational development.
• At the end of 2023, the rating agencies Standard & Poor’s and Fitch gave us a rating of BBB+, and Moody’s of Baa1. All three rating agencies gave us a stable outlook. 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 are anticipating earnings per share (adjusted for special factors) of over EUR 1.75 in 2024, based on the sound expected business development. We expect to see adjusted earnings per share increase again in 2025.

Our debt issuance program puts us in a position to place issues in the international capital markets at short notice. T‑Mobile US is being refinanced primarily in the form of senior unsecured notes. We can also issue short-term papers in the money market through our Deutsche Telekom and T‑Mobile US commercial paper programs.

Bonds and other financial liabilities in the total amount of EUR 5.8 billion and EUR 6.5 billion will fall due for repayment in 2024 and 2025, respectively, of which around EUR 3.3 billion and EUR 5.0 billion, respectively, relate to T‑Mobile US. 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. In January 2024, T‑Mobile US issued bonds with a total volume of USD 3 billion to cover some of its refinancing needs in 2024 at an early stage.

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.

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, we also cannot rule out the possibility of deviations.

The following tables summarize the forecasts for our financial and non-financial performance indicators up to 2025. They assume a comparable consolidated group and constant exchange rates, i.e., an organic basis. In order to create a comparable basis with the forecast period, the results of the 2023 financial year have been adjusted for significant changes in the composition of the Group which have been included in the planning, and for changes in the organizational structure in the pro forma presentation. Thus, the expectations for 2024 are based on the pro forma figures for 2023; expectations for 2025 are based on expectations for 2024. To indicate the intensity and trends of our qualified comparative forecasts, we apply the following aspects: strong decrease, decrease, slight decrease, stable trend, slight increase, increase, strong increase.

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

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

Our customer satisfaction – which is expressed using the TRI*M index performance indicator – is expected to remain stable in both 2024 and 2025 against the baseline that is already at a high level in the benchmark and has been recalculated for 2024. The values achieved in particular for our Germany and Systems Solutions operating segments, as well as across most of the Europe operating segment, put us in a leading position relative to the respective benchmarks. With the exception of the Europe operating segment, where our goal is to post slight improvements in some areas, we plan to maintain these positions for 2024.

Having achieved a high level of 76 points – on a scale of 0 to 100 – on the engagement score in the 2022 and 2023 pulse surveys, we expect the positive response of our employees regarding our Company to remain stable in the next surveys in 2024 and 2025.

For further information about the results of the employee surveys, please refer to the section “Employees.”

We expect our energy consumption to increase slightly at Group level in both 2024 and 2025. Excluding T‑Mobile US, we expect it to increase in 2024 and then remain stable from 2025. In both 2024 and 2025, we expect CO₂ emissions (Scope 1 and 2) to decline both at Group level and excluding T‑Mobile US. Since 2021, 100 % of the electricity requirements for all Group units have been met from renewable sources. As such, the majority of emissions have been eliminated.

For further information on our ESG KPIs, please refer to the section “Combined 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.

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. For the 2023 financial year, we propose a dividend of EUR 0.77 for each dividend-bearing share.

Deutsche Telekom AG’s unappropriated net income exceeded the prior-year forecast. It includes, among other factors, the positive effects on earnings from the sale of 51.0 % of the shares in companies of the German and Austrian cell tower business as well as income from the repayment of capital by a subsidiary which was partially recognized in income. For 2024, we do not expect any significant changes in the contributions of the subsidiaries to operating results. For the 2024 financial year as a whole, we expect an unappropriated net income that will allow the distribution of a dividend of 40 to 60 % of adjusted earnings per share.