Finance strategy
We announced our finance strategy for the years 2021 through 2024 at the Capital Markets Day in May 2021. For investors, Deutsche Telekom continues to pursue an attractive and reliable finance strategy. We will present our plans for the coming years at the Capital Markets Day scheduled for 2024.
Our finance strategy through 2024
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.
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 2023 financial year, as announced in November 2023, we propose a dividend of EUR 0.77 for each dividend-bearing share. This equates to 48 % of adjusted earnings per share. We thus offer our shareholders both an attractive return and planning reliability. As in previous years the dividend for the 2023 financial year will once again be paid out without deduction of capital gains tax.
At the 2021 Capital Markets Day, Deutsche Telekom AG’s Board of Management had also announced that it would take share buy-backs into consideration in the future. In November 2023, we announced that we will buy back shares in Deutsche Telekom AG in 2024 up to a total purchase price of EUR 2 billion under a share buy-back program. The buy-back commenced on January 3, 2024 and will be carried out in several tranches through December 31, 2024. The purpose of the share buy-back is to recoup part of the dilution effect from Deutsche Telekom AG’s 2021 capital increase. The repurchased shares will therefore be canceled.
Total capital expenditure is also to remain high in the next few years, in line with our finance strategy. 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.
2021 Capital Markets Day: Ambition levela up to 2024
a 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 as well as a constant composition of the Group.
b Before dividend payments and spectrum investment.
c Compound annual growth rate.
We 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 the period from 2021 to 2023, as well as our forecast for 2024, we believe we are on the right path to achieve these targets. We aim to continue growing sustainably throughout 2024.
For further information on the expected business development, please refer to the section “Forecast.”
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.