Shareholders' meeting: Obermann calls for less regulation

René Obermann, Chief Executive Officer (CEO)

René Obermann explained the new aspects that are emphasized in the strategy.

May 24, 2012

Deutsche Telekom wants to stand out more from its competitors and highlight its innovative strength in the future. At the shareholders' meeting in Cologne, René Obermann explained the new aspects that are emphasized in the strategy. He also called for "basic regulatory issues" to be resolved once and for all. "We therefore need less regulation, not more." Here is an overview of the key excerpts from his speech.

Obermann on regulation:
And the regulators are not just interested in the money we earn in the fixed network, but in helping themselves to revenue from mobile communications, too. And let me remind you, this is a market that has been open to competition from the outset. For example, termination rates have dropped by over 60 percent since 2007. The latest reduction alone cost the industry around 850 million euros in revenues in 2011.

Everyone is calling for high-speed networks in the furthest-flung corners of the country - ideally fiber-optic networks. And rightly so, as it happens - we need these networks for the future of the country. At the same time, however, politicians at the European level and the national regulatory authorities are taking away the incentives for investment.

If Germany wants to continue having one of the most modern infrastructures in the world, the basic regulatory issues must be resolved once and for all. In one of the latest surveys, European capital market analysts conclude that a lack of investment incentives due to mis-guided regulation is the main barrier to further investment. We therefore need less regulation, not more.

Obermann on investments:
Finding ourselves torn between regulation and market requirements, we are investing more than any of our competitors in networks, service quality, and IT. We invested nearly 3.7 billion euros over the past year in Germany alone. This is paying off: In 2011, we won the three leading network tests, from the German Stiftung Warentest consumer association as well as from Chip and Connect magazines.

Obermann on the fine-tuned strategy:
In essence, we are striving to provide our customers with communication, transaction, entertainment, and IT services, based on a reliable state-of-the-art infrastructure. We want our customers to say: Deutsche Telekom is my first choice for connected life and work. We plan to achieve this with a focus on the following strategic areas: Integrated networks for the gigabit society, innovation through collaboration, secure cloud solutions and keeping customers delighted.

These are the action areas on which we must now focus. We know what we have to do - and we know how to do it: We must fight for every customer in our core business. We must change our company, streamline our processes and organizations in order to remain competitive in an industry that is undergoing dramatic change. And we must renew our company, become more innovative and faster, in order to become successful with Internet and cloud services.

Obermann on the tasks that lay ahead:
In view of the massive pressure on prices, we must first work harder to cut our costs. In recent years, we have been very successful in improving our efficiency - but we must not stop there. We must free up further funds to allow us to make important investments in networks and innovations - and for the necessary personnel restructuring, which cost 1.2 billion euros in the past year alone.

Secondly, it would be strategically wrong to build our future business on network business alone, since it will remain regulated and continue to decline. It was therefore crucial and logical that we set out two years ago to tackle fields of innovation beyond traditional fixed-network lines. Some of these fields already generate revenue - first and foremost among them the mobile Internet - the development of others will require more staying power.

Obermann on growth areas:
You already know our five innovation and growth areas: Revenue is expected to rise to around 29 billion euros in the years ahead. That applies especially to the mobile Internet. Our target of 10 billion euros is realistic. We have already topped the 5 billion-euro mark for revenue.

Obermann on T-Mobile USA:
There is no doubt that business operations in the USA continued to be affected by uncertainty in 2011. In the fourth quarter, we recognized impairments of 2.3 billion euros. However, the frequency spectrum we received from AT&T reinforces our position on the U.S. market. We are investing in modernizing the networks and are now developing an LTE network.

Of course, we continue to look for a long-term solution to improve earnings
in our U.S. business. However, a complete sale like the one to AT&T is considered unlikely.

Obermann on share development:
Deutsche Telekom has fared relatively well in this tough environment. If we compare the total return - meaning price performance plus dividend - since the realignment of the Group in March 2007, T-Share developed better than the DAX and significantly better than the shares of comparable companies.

Obermann on the dividend:
Despite the economic crisis, despite the brutal competition and despite adverse regulation, Deutsche Telekom stands today for stability and reliability. This means high value for long-term investors in these uncertain times.

While a number of enterprises from our industry are cutting their dividends, we are sticking to our targets. For the 2011 financial year, the Board of Management and the Supervisory Board therefore propose to the shareholders' meeting to pay a dividend of 70 cents per share. This year, too, by the way, the dividend is tax-free for shareholders in Germany.

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