Group organization, strategy, and management

With regard to our Group organization, strategy, and management, please refer to the explanations in the 2022 combined management report (2022 Annual Report). From the Group’s point of view, the following significant events in the first three quarters of 2023 resulted in changes and/or additions.

Group organization

Sale of GD Towers. On July 13, 2022, Deutsche Telekom agreed to sell a 51.0 % stake in the cell tower business companies in Germany and Austria (GD Towers), which were assigned to the Group Development operating segment, to DigitalBridge and Brookfield. After all necessary regulatory approvals had been duly granted and all other closing conditions met, the transaction was closed on February 1, 2023. The sale price is based on an enterprise value of EUR 17.5 billion. The total gain on deconsolidation resulting from the sale amounts to EUR 15.9 billion, of which EUR 12.9 billion is included in profit/loss from discontinued operation as other operating income in the consolidated income statement as of the deconsolidation date. As Deutsche Telekom has largely leased back the sold passive network infrastructure in Germany and Austria under a sale and leaseback transaction, a further EUR 3.0 billion will be recognized pro rata in subsequent periods. Overall, right-of-use assets were recognized in the amount of EUR 2.0 billion and lease liabilities in the amount of EUR 5.0 billion. The transaction resulted in cash proceeds of EUR 10.7 billion. The stake retained by Deutsche Telekom of 49.0 % has been included in the consolidated financial statements using the equity method since February 1, 2023. The carrying amount of the investment amounted to EUR 6.1 billion as of September 30, 2023.

For further information on the sale of the GD tower companies, please refer to the section “Changes in the composition of the Group and other transactions” in the interim consolidated financial statements.

Sale of the U.S. wireline business. On September 6, 2022, T‑Mobile US reached an agreement with Cogent Infrastructure (Cogent) on the sale of T‑Mobile US’ fiber-optic-based wireline business. Under the agreement, Cogent will take over all shares in the entity that holds all of the assets and liabilities related to the former Sprint’s fiber-optic-based wireline network. The transaction was closed on May 1, 2023. All necessary regulatory approvals had been duly granted and all other closing conditions met. The sale price was USD 1 and was subject to customary adjustments laid down in the purchase agreement. The cash proceeds received upon completion of the transaction amounted to USD 14 million (EUR 13 million). The loss on deconsolidation resulting from the sale amounted to EUR 4 million. In addition, upon completion of the transaction, T‑Mobile US undertook to enter into a separate agreement on IP transit services, according to which T‑Mobile US will pay a total of USD 0.7 billion (around EUR 0.6 billion) to Cogent in agreed installments over subsequent periods. In connection with the payment obligations entered into as part of the transaction, total liabilities of EUR 0.7 billion had already been recognized in the 2022 financial year. As a result of the concluded sales agreement, the assets and liabilities of the wireline business were reported in the consolidated statement of financial position as “held for sale” from September 30, 2022 up until their sale on May 1, 2023.

Furthermore, the transaction described below will affect the segment and organizational structure of Deutsche Telekom in the future:

Agreement on the acquisition of Ka’ena in the United States. On March 9, 2023, T‑Mobile US entered into a Merger and Unit Purchase Agreement for the acquisition of 100 % of the outstanding equity of Ka’ena Corporation and its subsidiaries including, among others, Mint Mobile, for a maximum purchase price of USD 1.35 billion to be paid out 39 % in cash and 61 % in shares of T‑Mobile US common stock. Ka’ena Corporation is currently one of the wholesale partners of T‑Mobile US, offering wireless telecommunications services to customers. The purchase price is variable dependent upon specified performance indicators of Ka’ena Corporation during certain periods before and after closing and consists of an upfront payment at deal close, subject to certain agreed-upon adjustments, and a variable earnout payable 24 months after the close of the transaction. The upfront payment is expected to be a revised amount of around USD 1.2 billion (before working capital adjustments). The acquisition is subject to certain customary closing conditions, including certain regulatory approvals, and the transaction is expected to close around the end of the first quarter of 2024.

Group strategy

Shareholder remuneration. Against the background of the results expected for the 2023 financial year as well as the dividend policy communicated at the 2021 Capital Markets Day, the Board of Management plans to propose to the shareholders’ meeting to increase the dividend from EUR 0.70 per share for the 2022 financial year to EUR 0.77 per share for the 2023 financial year. In view of the guidance for earnings per share of over EUR 1.60 for 2023, the proposed dividend of EUR 0.77 per share is thus in the middle of the intended payout range. The Supervisory Board will make its decision on the Board of Management’s dividend planning as soon as the definitive business figures for the 2023 financial year are available. A dividend payment based on the final dividend proposal by the Board of Management and the Supervisory Board for the 2023 financial year is subject to approval by the shareholders’ meeting and to fulfillment of other legal conditions. In addition, the Board of Management plans to buy back shares of Deutsche Telekom AG in 2024 for up to EUR 2 billion. The planned share buy-backs are intended to recoup part of the dilution effect from Deutsche Telekom’s 2021 capital increase.

End of the share buy-back program from September 2022 and majority stake in T‑Mobile US secured. In the first three quarters of 2023, T‑Mobile US bought back around 77.5 million additional shares with a total volume of USD 11.0 billion (EUR 10.3 billion) under its share buy-back program. This puts the total number of shares that have been repurchased since the program’s inception in September 2022 at around 98.8 million at a price of USD 14.0 billion (EUR 13.2 billion). The budget for the share buy-back program was therefore fully exhausted by the end of September 2023. Taking the treasury shares held by T‑Mobile US into account, Deutsche Telekom’s stake in T‑Mobile US stood at 52.1 % as of September 30, 2023.

Deutsche Telekom has achieved its declared capital market objective from 2021 of securing the majority in T‑Mobile US. Beginning in early 2024, Deutsche Telekom plans to sell a portion of its T‑Mobile US share portfolio on the market, without jeopardizing its own majority ownership position in T‑Mobile US. The precise number of T‑Mobile US shares that Deutsche Telekom plans to sell is yet to be decided.

T‑Mobile US shareholder return program from September 2023. On September 6, 2023, T‑Mobile US announced a shareholder return program of up to USD 19 billion that will run from October 1, 2023 through December 31, 2024. The program comprises additional share buy-backs and dividends to be paid out on a quarterly basis. The amount available for share buy-backs will be reduced by the amount of any dividends approved.

On September 25, 2023, the T‑Mobile US Board of Directors declared an initial cash dividend of USD 0.65 per share for the fourth quarter of 2023, which will be paid out on December 15, 2023. EUR 0.4 billion of the cash dividend is attributable to Deutsche Telekom’s stake and EUR 0.3 billion to non-controlling interests in T‑Mobile US.

Management of the Group

Presentation of GD Towers according to the management approach. The GD Towers business entity had been recognized in the interim consolidated financial statements as a discontinued operation from the third quarter of 2022 until its sale on February 1, 2023. In the interim Group management report, we include the contributions by GD Towers in the results of operations according to the management approach for the period mentioned. The following table provides a reconciliation of the amounts recognized in the consolidated income statement to the financial performance indicators relevant for the management approach:

Broader definition of service revenue. Since January 1, 2023, service revenue additionally includes certain software revenues generated with ICT business in the Systems Solutions and Europe operating segments, as well as in the Group Headquarters & Group Services segment. Comparative figures have been adjusted retrospectively.