- CEO Tim Höttges calls for Europe to catch up at shareholders' meeting
- Deutsche Telekom wants to drive the fourth industrial revolution as the leading European telecommunications provider
- Proposed dividend of EUR 0.50 per share for 2013
- Total return for Telekom share of 56 percent in 2013
- Share price increase of 42 percent accounts for some EUR 16 billion
Europe has a right to digital self-determination and should not be reckless with it, urged CEO Tim Höttges at the Deutsche Telekom shareholders' meeting in Cologne on May 15. In areas such as semiconductor chips, terminal devices, and Internet services, the dominance of U.S. and Asian companies seemed unassailable, he said. A comparison of the European telecommunications industry with those in other major economic regions was also cause for concern. With data traffic rising worldwide, the associated revenues were increasing sharply in Asia and the U.S., but falling in Europe - and with it, the strength to invest. Key communication services and corresponding personal data could in future be completely beyond European control. "We are losing our digital independence," emphasized Höttges and added: "I would like responsibility for Europe from Europe."
"We need a data protection regulation with the same terms and conditions for telecommunications and Internet companies. By that I mean strict, uniform data privacy standards that have to apply to non-European providers too, if they want to offer their services here." Market regulation should not weaken European providers, but instead strengthen them, explained Höttges. In order to encourage investments in network expansion, he said, the focus of regulation could not just lie on low consumer prices. Allocation of mobile spectrum needed to be harmonized across Europe and also tie in with expansion targets. Roaming charges could be abolished in a single European market following a certain transitional period. In return, however, the anti-trust authorities would have to stop looking at tiny little individual markets and start seeing Europe as a common market.
The world was facing the next industrial revolution, the road to Industry 4.0, said Höttges. Machine-to-machine networking, the collection and analysis of data and, as a result, the automated control of processes were gaining significance. "And the raw material of this revolution - the data - runs through our networks. We make the data available, whenever and wherever. And we are making the data usable, with services such as storage on our secure servers - what is known as cloud computing - or platforms for machine-to-machine communication."
Deutsche Telekom's strategic answer to the global challenges is to become the leading European telecommunications provider: a position it aims to achieve by focusing on four strategic areas. First, it will build an integrated network, bringing together communication technologies such as fixed-line, mobile, and WiFi to form a pan-European network across national borders and at considerably lower prices. For this to be utilized to the largest possible extent, demand is required from as many customers as possible: the second area of focus. "That is why we are addressing all our customers - we are not excluding anyone. But that also means that we have to fulfill a vast range of different wishes," said Höttges. The basis for this are best networks and best service. However, customers also expect the latest apps and services from the online world. "We are building a partner system for innovative services – which our partners simply link up to in the same way as to a power strip. We provide the fast access to standardized interfaces. In the background, we take care of the billing, security, and transmission quality." In a fourth focal point, Deutsche Telekom is taking a close look at business customer requirements. Not nearly as many Internet companies participate in this growing market as in the consumer market. Deutsche Telekom is helping companies to digitize their business models, connect their machines and industrial plants, and analyze large volumes of data.
The company met its guidance in the 2013 financial year. The Deutsche Telekom share recorded a total return of 56 percent. Net revenue of the Group increased by 3.4 percent. Free cash flow amounted to EUR 4.6 billion and adjusted EBITDA totaled EUR 17.4 billion. On this basis, the Board of Management and Supervisory Board propose to the shareholders' meeting a dividend of EUR 0.50 per share. As in the previous year, shareholders can choose to receive the dividend in the form of cash or Telekom shares. Höttges looks back on a successful year: "Telekom is growing and creating value. We increased our shareholders' capital in 2013. The 42 percent increase in the share price alone accounts for some EUR 16 billion."
Telekom extended its lead in German mobile business and went from strength to strength in fixed-network business. This positive development is partly due to growth in optical fiber broadband lines. Deutsche Telekom is investing more than EUR 23 billion in building out the network in Germany between 2010 and 2015.
In 2013, T-Mobile US saw its customer base grow by some two million after recording high losses the year before. The business combination with MetroPCS, coupled with the very successful new strategic positioning as an "Un-carrier", lured large numbers of customers away from the competition. This trend continues in 2014 with T-Mobile US already adding 2.4 million customers to its books in the first quarter, putting it just shy of the 50 million mark. This success is clearly reflected in the share price and the enterprise value increased by some 53 percent in the period April through December 2013.
Despite the difficult economic situation, the national companies in Europe fared well. As of the end of 2013, in European business Deutsche Telekom had more than 25.5 million mobile contract customers, just under 5 million broadband lines, and around 3.6 million television customers. The national companies continue to focus on mobile Internet, television products, and business customer solutions in 2014.
T-Systems needs to become more profitable in some areas. Deutsche Telekom's corporate customer arm is thus examining the entire portfolio and will realign its Systems Solutions business with a focus on expanding digital growth areas, such as standardized products from the cloud, and transforming business with customer-specific solutions to make it profitable in the long term. An agreement has already been reached with the works councils and Verdi trade union on the TSI 2015+ transformation program.
About Deutsche Telekom Deutsche Telekom is one of the world's leading integrated telecommunications companies with over 142 million mobile customers, 31 million fixed-network lines and over 17 million broadband lines (as of December 31, 2013). The Group provides fixed-network, mobile communications, Internet, and IPTV products and services for consumers, and ICT solutions for business and corporate customers. Deutsche Telekom is present in around 50 countries and has approximately 229,000 employees worldwide. The Group generated revenue of EUR 60.1 billion in the 2013 financial year – over half of it outside Germany. This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward-looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, depreciation and amortization, cash flows, and personnel-related measures. They should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. Among the factors that might influence our ability to achieve our objectives are the progress of our workforce reduction initiative and other cost-saving measures, and the impact of other significant strategic, labor, or business initiatives, including acquisitions, dispositions, business combinations, and our network upgrade and expansion initiatives. In addition, stronger than expected competition, technological change, legal proceedings, and regulatory developments, among other factors, may have a material adverse effect on our costs and revenue development. Further, the economic downturn in our markets, and changes in interest and currency exchange rates, may also have an impact on our business development and the availability of financing on favorable conditions. Changes to our expectations concerning future cash flows may lead to impairment write downs of assets carried at historical cost, which may materially affect our results at the group and operating segment levels. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, our actual performance may materially differ from the performance expressed or implied by forward-looking statements. We can offer no assurance that our estimates or expectations will be achieved. Without prejudice to existing obligations under capital market law, we do not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise.
In addition to figures prepared in accordance with IFRS, Deutsche Telekom also presents non-GAAP financial performance measures, including, among others, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted net profit, free cash flow, gross debt, and net debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.