- “Focus, fix and grow” strategy has set the scene for success
- Dividend of EUR 0.72 proposed
- Personnel restructuring secures jobs and gives the Group more room for maneuver
- Board Members take cut in salary
- Sale of non-core units in the three-digit million range
In view of the fierce competition dominating Deutsche Telekom's home market in particular, the period of necessary changes is not yet over: “We will have to implement further reforms in the Group if we are to be successful,” emphasized Chairman of the Deutsche Telekom Board of Management, René Obermann, at the shareholders’ meeting in Cologne. Obermann is confident that the strategy adopted by the Management Board under the heading of “Focus, fix and grow” is putting the Company on the right track. “We want to position ourselves as the leading broadband provider by using efficient technologies in the fixed and mobile fields,” the CEO added.
Retrospective and 2006 dividend Looking back on 2006, René Obermann described the past financial year as difficult: “Competition, especially in relation to pricing in the fixed network business, reached a degree of intensity during the year that even caught industry experts by surprise.” Given the Group’s adjusted net profit of EUR 3.9 billion, Deutsche Telekom is however sticking to its original plans of paying out a dividend of EUR 0.72 per share. “In addition to staff, the capital market is also placing demands on us which we have to meet. We have to offer potential capital market returns comparable to those of other companies in our industry,” emphasized the CEO.
Managing personnel restructuring in an entrepreneurial and responsible way Obermann stressed that staff had shown great dedication in restructuring the Group in the past years, making a key contribution to the transition of Deutsche Telekom from a public authority to a commercial enterprise. The Management Board is acutely aware of its particular responsibility toward staff. It is therefore choosing an option with the currently debated service companies which will retain jobs within the Group while also compensating productivity deficiencies: “Faced with such figures, many companies would simply close and offshore the relevant parts of the business. We don't want to do that: Our aim is to make jobs within Deutsche Telekom Group more cost-effective and retain them wherever possible.” As a sign of their responsibility all Board members of Deutsche Telekom have volunteered to do without a month’s salary. As the Chairman of the Board, René Obermann will surrender two months salary. “We are well aware of the difficult situation our employees face and would like to express our solidarity,” Obermann commented.
Outlook: Leading the Group into a stronger future Despite the present challenges in its markets, Deutsche Telekom is a strong company and plans to stay that way. “We will have to continue to fight hard to secure our competitiveness, and in turn, cost-effective jobs within the Group,” highlighted René Obermann as he spoke to shareholders. The Group is determined to maintain its market leadership at home and to boost growth in Mobile Communications outside Germany in order to improve overall profitability and return on equity. The Board of Management’s concrete approach to this is the “Focus, fix and grow” strategy, which defines four central areas of action:
- Considering the great significance of the domestic market, the Company plans to considerably improve its competitive position in Germany. The home market continues to be the core market with a share of over 50 percent of revenues.
- Internationally, the Group aims to grow by focusing on Mobile Communications.
- In addition, Deutsche Telekom intends to leverage the new Mobile Internet and Web 2.0 trends to generate new growth. Mobilizing the Internet is developing into a major growth driver.
- In the Business Customer segment, the Group is looking for a strong partner in order to make the business more successful thanks to a broader international presence and economies of scale.
Disposal of non-core business: First transactions conducted
On top of that, Deutsche Telekom has started divesting non-core strategic assets as and when opportunities present themselves on the market. This process is already well under way in parts of its real-estate business and at international companies such as Club Internet in France; in other areas, Deutsche Telekom is still reviewing its disposal options.
Deutsche Telekom is holding exclusive talks with France’s Neuf Cegetel on the acquisition of Club Internet. This transaction is expected to be finalized in the first half of 2007. The sale of the stake in the real estate marketing company Sireo to the previous partner has been agreed subject to the approval of competition authorities. Deutsche Telekom has also closed deals on two transactions that will relieve the Group’s real-estate portfolio of two properties covering around 260,000 square meters and around 80,000 square meters. The corresponding cash inflow has been in progress since the beginning of the year. Above transactions – including Club Internet at the price currently negotiated – are worth a figure at the top of the triple-digit million range.
This press release contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. They are generally identified by the words “expect,” “anticipate,” “believe,” “intend,” “estimate,” “aim,” “goal,” “plan,” “will,” “seek,” or similar expressions and include generally any information that relates to expectations or targets for revenue, adjusted EBITDA or other performance measures. Forward-looking statements are based on current plans, estimates and projections. You should consider them 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, including those described in the sections “Forward-Looking Statements” and “Risk Factors” of the company’s Form 20-F report filed with the U.S. Securities and Exchange Commission. Among the relevant factors are the progress of Deutsche Telekom’s workforce reduction initiative and the impact of other significant strategic or business initiatives, including acquisitions, dispositions, business combinations, and cost saving initiatives. In addition, regulatory rulings, stronger than expected competition, technological change, litigation and supervisory developments, among other factors, may have a material adverse effect on costs and revenue development. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom's actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom can offer no assurance that its expectations or targets will be achieved. Deutsche Telekom does 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 presents non-GAAP financial performance measures, e.g., 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. For further information relevant to the interpretation of these terms, please refer to the chapter "Reconciliation of pro forma figures," which is posted on Deutsche Telekom’s Investor Relations website at [www.deutschetelekom.com.]