Outlook & Financial strategy

Outlook
Forecast

For 2021, we expect the following year-on-year growth – based on a constant exchange rates:
- Our sales are expected to continue to increase slightly in 2021.
- Adjusted EBITDA (after leases) in 2021 is expected to be more than € 37.2 billion, compared with € 35.0 billion in 2020.
- Free cash flow (after leases) (after leases) is expected to be around € 8.0 billion in 2021 compared with € 6.3 billion in 2020.

Dividend
For the fiscal year 2021 the dividend will be € 0,64 (to be paid out in May 2022). As in previous years, the dividend distribution is tax-free.

^{2 Subject to the approval of the Annual General Meeting}

Operations:

Germany: Telekom Deutschland will maintain its clear market leadership. We accelerate the roll-out of our networks: by 2024, we will reach around 10 million households with FTTH and increase our 5G coverage to over 97 percent. This will enable us to accelerate growth in the residential and business customer segments. By systematically exploiting the opportunities offered by digitization, we will reduce costs and improve our earnings and return on equity.

USA: T-Mobile US is integrating the acquired wireless company Sprint and is rapidly rolling out its nationwide 5G network.

Europe: The positive trend of recent years in the traditional communications markets of our Europe operating segment will continue in the next years. Growth is being driven by a further increase in demand for mobile data and broadband and pay TV lines.

System Solutions: We want to be the preferred provider of telecommunications and IT services. As part of an extensive transformation program, we have driven forward the establishment and expansion of growth themes, improved the efficiency of our existing business, and discontinued or transferred to partners some activities that are not suitably profitable for us.

Financial strategy
Deutsche Telekom’s corporate strategy is supported by a financial strategy, which focuses on three key aspects.

1. Attractive Payout-Policy for Shareholders
Our dividend policy is to pay out 40 to 60 percent of the adjusted net income per share. The dividend for 2021 is expected to be € 0.64. We guarantee a minimum dividend of € 0.60 per share.

^{* Subject to the resolution of the Annual General Meeting}

2. Security for providers of debt capital
Deutsche Telekom seeks to have undisputed access to the debt capital markets at any time. Solid balance sheet ratios are meant to guarantee this access. Therefore Deutsche Telekom sets itself the following comfort zone targets/ratios:

Rating: A-/BBB

Ratio net debt/adj. EBITDA: 2.25 – 2.75x

Equity ratio: 25-35%

Liquidity reserve covering maturities of coming 24 months

3. Increase of Return on Capital Employed
The Finance Strategy supports the group wide transformation project to become the Leading European Telco. We want to become quality leader in our domestic market both in terms of mobile communication and fixed networks. The financial strategy, which supports the sustainable increase in value has a focus on the following three aspects:

Return on Capital Employed: We aim to increase return on capital employed in the long-term. For the fiscal year 2020 we recorded a ROCE of 4.6 percent. Our ambition for 2024 is a return on capital employed of more than 6.5 percent.

Portfolio Management: We continue to focus on our core business, but at the same time, retain a presence in growth areas with strong partners.

Equity ratio: 25-35%

Liquidity reserve covering maturities of coming 24 months