Group organization, strategy, and management
With regard to our Group organization, strategy, and management, please refer to the explanations in the 2023 combined management report (2023 Annual Report). From the Group’s point of view, the following significant events in the first nine months of 2024 resulted in changes and/or additions.
Group organization
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 the U.S. prepaid provider Ka’ena and its subsidiaries including, among others, Mint Mobile, for a maximum purchase price of USD 1.35 billion. The transaction was consummated on May 1, 2024. All necessary regulatory approvals had been duly granted and all other closing conditions met. Ka’ena is included in Deutsche Telekom’s consolidated financial statements as of May 1, 2024.
At deal close, T‑Mobile US made an upfront payment of around USD 1.0 billion (EUR 0.9 billion), comprising a cash component of around USD 0.4 billion (EUR 0.4 billion) and around 3 million ordinary shares of T‑Mobile US with a total value of around USD 0.5 billion (EUR 0.5 billion), determined on the basis of the closing share price on April 30, 2024. In addition, there is a variable earnout payable on August 1, 2026 if Kaʼena achieves specified performance indicators. The amount of the upfront payment is expected to be finalized by the end of 2024.
Changes to the segment and organizational structure in 2023
Presentation of GD Towers in the prior year. The sale of the GD Towers business entity was consummated on February 1, 2023. Since that date, GD Towers has no longer been part of the Group. It had been recognized in the interim consolidated financial statements as a discontinued operation from the third quarter of 2022 until its sale. By contrast, the financial performance indicators for the prior year in the interim Group management report contain the value contributions of GD Towers up to the end of January 2023. Please refer to the following table for a breakdown of these performance indicators into the amounts recognized in the consolidated income statement in the first nine months of 2023:
millions of € |
|
|
|
|
|
|
Q1-Q3 2023 |
Of which: continuing operations |
Of which: discontinued operation |
|---|---|---|---|---|
Net revenue |
|
82,616 |
82,601 |
15 |
Service revenue |
|
69,025 |
69,029 |
(4) |
EBITDA |
|
46,455 |
33,451 |
13,004 |
Depreciation of right-of-use assets |
|
(3,618) |
(3,618) |
0 |
Interest expenses on recognized lease liabilities |
|
(1,346) |
(1,341) |
(5) |
EBITDA AL |
|
41,492 |
28,492 |
12,999 |
Special factors affecting EBITDA AL |
|
11,004 |
(1,923) |
12,927 |
EBITDA AL (adjusted for special factors) |
|
30,488 |
30,415 |
73 |
Depreciation, amortization and impairment losses |
|
(17,804) |
(17,804) |
0 |
Profit (loss) from operations (EBIT) |
|
28,651 |
15,647 |
13,004 |
Profit (loss) from financial activities |
|
(4,446) |
(4,430) |
(16) |
Profit (loss) before income taxes |
|
24,205 |
11,217 |
12,989 |
Earnings per share (basic and diluted) |
€ |
3.78 |
1.03 |
2.75 |
Adjusted earnings per share (basic and diluted) |
€ |
1.23 |
1.22 |
0.01 |
(Expected) changes to the segment and organizational structure in 2024/2025
Agreement on the acquisition of Lumos in the United States. On April 24, 2024, T‑Mobile US entered into an agreement with the investment fund EQT on the acquisition of the fiber-to-the-home platform Lumos. The transaction is subject to regulatory approvals as well as other customary closing conditions and is expected to close in early 2025. Upon closing, T‑Mobile US is expected to invest approximately USD 1.0 billion (EUR 0.9 billion) in the joint venture to acquire a 50 % equity stake and all existing fiber customers, with the funds invested by T‑Mobile US being used by Lumos for future fiber builds. In addition, T‑Mobile US is expected to contribute an additional amount of approximately USD 0.5 billion (EUR 0.4 billion) between 2027 and 2028.
Agreement on the acquisition of UScellular in the United States. On May 24, 2024, T‑Mobile US entered into an agreement on the acquisition of UScellular’s wireless operations and specific spectrum licenses. The purchase price totals around USD 4.4 billion (EUR 3.9 billion) and comprises a cash component and the transfer of debt of up to USD 2.0 billion (EUR 1.8 billion). The transaction is subject to regulatory approvals as well as other customary closing conditions and is expected to close in mid-2025.
Agreement on the acquisition of Metronet in the United States. On July 18, 2024, T‑Mobile US entered into an agreement with KKR on the acquisition of the fiber-to-the-home platform Metronet and certain of its affiliates. The transaction is subject to regulatory approvals as well as other customary closing conditions and is expected to close in 2025. Upon closing, T‑Mobile US is expected to invest approximately USD 4.9 billion (EUR 4.4 billion) in the joint venture to acquire a 50 % equity stake and all existing residential fiber customers, as well as to fund the joint venture.
Group strategy
Capital Markets Day 2024. On October 10 and 11, 2024, we presented our medium-term strategy and the financial outlook at our Capital Markets Day. With an enhanced strategy, we are aiming for a new phase of growth up to 2027: We expect average annual growth of around 4 % in both revenue and service revenue, and of 4 to 6 % in adjusted EBITDA AL. Free cash flow AL is expected to reach around EUR 21 billion in 2027. Investments of the Group (Deutsche Telekom without T‑Mobile US) excluding expenses for mobile spectrum are expected to account for around 21 % of service revenues in 2027. From 2024, the leverage ratio (ratio of net debt to adjusted EBITDA) is expected to remain stable at 2.75x or lower. The dividend will continue to track the development in adjusted earnings per share. This figure is set to rise from the 2023 level of EUR 1.60 to around EUR 2.5 by 2027. 40 to 60 % of adjusted earnings per share are to be paid out. For 2025, we are planning a total of up to EUR 6.4 billion in shareholder remuneration including share buy-backs of up to EUR 2 billion. The dividend for the 2024 financial year is expected to rise to EUR 0.90 per share. These plans by the Board of Management are subject to the necessary approvals by the relevant corporate bodies. Growth is to be driven by the enhancement of the business model. Key factors in this will be global economies of scale and the systematic use of artificial intelligence and data. Because our vision of becoming the Leading Digital Telco has not changed.
Governance
By resolution of October 13, 2023, the Supervisory Board of Deutsche Telekom AG appointed Dr. Ferri Abolhassan as the Board member responsible for T‑Systems for the period from January 1, 2024 to December 31, 2026. Mr. Abolhassan thereby succeeds Adel Al-Saleh, who had asked for his contract to be terminated and left the Group as of December 31, 2023.
In its meeting on December 12, 2023, the Supervisory Board adopted a new committee structure to take effect from January 1, 2024. The previous Technology and Innovation Committee has been subsumed under the new Strategy, ESG, and Innovation Committee. In addition, the Audit Committee and the Finance Committee have been merged.
In accordance with the published agenda, on April 10, 2024, the Shareholders’ Meeting of Deutsche Telekom AG passed resolutions on, among other matters, the approval of the actions of the Board of Management and the Supervisory Board, the selection of the external auditor for the 2024 financial year, the amount of the dividend (EUR 0.77 per dividend-bearing no par value share; EUR 3.8 billion in total), and the change to § 13 of the Articles of Incorporation (remuneration of the Supervisory Board).