Europe's prosperity depends on the success of digitization

  • Timotheus Höttges: "Deutsche Telekom is part of the Architecture for a Digital Future"
  • The Deutsche Telekom CEO urges free competition and the same rules for everyone
  • Proposed dividend of EUR 0.50 per share for 2014
  • Total shareholder return in 2014 at 11 percent, thus outperforming the overall market

Europe's future prosperity depends on the success of digitization. This was the key message conveyed by CEO Timotheus Höttges at the shareholders’ meeting in Cologne on May 21. Everything that can be digitized is being digitized, he said, adding that everything that can be connected is being connected – people, machines, and products. Those who fail to directly tackle the challenge of digitization will soon no longer play a role in the market, Höttges went on to say. "Perhaps not today, but certainly tomorrow and the day after tomorrow."

Deutsche Telekom is accompanying entire sectors and industries in the transition to connected work, production, and sales, said Höttges. The Deutsche Telekom CEO said that networks with ever higher speed and ever higher performance provide the basis for digitization and the business success that this engenders. He noted that the Group annually invests billions in building out the network and thus pursues its vision of becoming the leading European telecommunications provider. "Networks are the basis of all things. This is why we invest more than any other company. A large proportion of our investments totaling almost EUR 10 billion goes into networks. We are part of the Architecture for a Digital Future which we actively help craft – for us and for others."

The "blueprint" here remains focused on four strategic goals

  1. Integrated IP networks
  2. Best customer experience
  3. Win with partners
  4. Lead in business

By creating a network architecture entirely based on the Internet protocol, Deutsche Telekom is pressing ahead across Europe with the transformation of its telephone network. The high-speed mobile standard LTE will soon reach speeds of up to 300 megabits per second, vectoring technology is ratcheting up speeds in the domestic fixed network, and the hybrid technology combines the best of fixed-network and mobile solutions, with improved high-speed performance on top of that. Furthermore, with the European PAN network, Deutsche Telekom is connecting the networks of a number of countries, making it possible for instance to set up an international corporate network for business customers in just 15 minutes – a process that up till now took 30 days after ordering.

Customers remain the focus of everything that the company does. With MagentaEINS last year, Deutsche Telekom became the first company on its home market to launch a service that integrates fixed network, mobile communications, and television. Since September 2014, one million customers have opted for a MagentaEINS package. MagentaEINS makes it even easier for customers to combine the relevant products from the world of Deutsche Telekom. The concept of an integrated service is so convincing that it is now being launched on other European markets, with Slovakia and Romania leading the way.

But Deutsche Telekom cannot meet every challenge on its own. Big and small partners, established industry giants and agile startups help breathe life into the networks and allow the Company to stand out from the competition. "We do not always have to develop everything ourselves at Deutsche Telekom. If a good solution already exists, why should we not enter into a partnership with the company in question?" asked Höttges. The CEO says that start-ups do not always see new developments and trends earlier than large companies, but they can react to them more quickly and flexibly.

Another important building block is the area of business customers. The term Industry 4.0 encompasses the digitization in industries such as machine and plant engineering, power plant engineering, and automotive production. With the transformation of T-Systems, Deutsche Telekom is focusing on future and growth-oriented areas like cloud computing, machine-to-machine communication, and the analysis of large quantities of data.

The digital world is currently being remapped in huge steps, said the Deutsche Telekom CEO, and he called on providers like Facebook and WhatsApp to support "free competition". Timotheus Höttges: "Although providers operate on the same market, the same rules do not apply. Competition is only free when it is also fair,” he said, adding that he was not referring to more regulation. On the contrary, he urged regulators to adopt a wider definition of markets and not continue to limit themselves to structures where the market boundaries are identical with national borders.

As the most European of all telecommunications companies, Höttges sees Deutsche Telekom as having special responsibilities when it comes to dealing with data. "The T brand stands for trust," said the CEO, who noted: "We respect the privacy of our customers." In order to maintain equal opportunities and create the same rules for everyone, Deutsche Telekom is campaigning for a European data protection regulation. Höttges: "In a digital world, digital dignity must also be inviolable."

Net profit/loss underscores that corporate strategy and social responsibility can go hand-in-hand. Deutsche Telekom grew more in 2014 than it has in many years. During the 2014 financial year, the Group recorded an increase in revenue of 4.2 percent to EUR 62.7 billion, reaching the goals that it had set for itself and creating value for the shareholders. Adjusted EBITDA increased by nearly 1 percent to EUR 17.6 billion. This is the first EBITDA growth in six years. Free cash flow – which is also influenced by high network investments – was at around EUR 4.1 billion, which also put it on target for the entire year. "We believe in our direction. We have put the Group back on track for growth and will continue resolutely to pursue this course," said Höttges.

This is also reflected in the results for the first quarter of 2015, in which the Group displayed strong growth with an organic increase in revenue of 4.7 percent. Reported revenue increased – partly influenced by the strong dollar exchange rate – by 13.1 percent.

Based on the results from 2014, the Board of Management and Supervisory Board proposed to the shareholders’ meeting on May 21 an unchanged dividend of EUR 0.50 per share. As in the previous two years, this dividend can be received in cash or, if desired, in the form of shares.

As a key component of shareholder remuneration, the dividend has made the T-Share an attractive investment, especially in the current period of low interest rates. The total shareholder return from share price development and dividend payments from January to December 2014 amounted to an increase of 11 percent, which means that the T-Share significantly outperformed Germany’s Dax and Europe’s Euro Stoxx indexes. What is more, the price of the T-Share has increased by an additional 26 percent since the beginning of the year (reference date: May 20, 2015). For the financial years 2015 to 2018, the Board of Management aims to increase the dividend in line with growth in free cash flow, which is expected to rise by an average of around ten percent per year.

Once again, Deutsche Telekom offers its shareholders long-term and reliable prospects.

About Deutsche Telekom
Deutsche Telekom is one of the world’s leading integrated telecommunications companies with around 151 million mobile customers, 30 million fixed-network lines, and more than 17 million broadband lines (as of December 31, 2014). The Group provides fixed network, mobile communications, Internet and IPTV products and services for consumers, and ICT solutions for business customers and corporate customers. Deutsche Telekom is present in more than 50 countries and has approximately 228,000 employees worldwide. The Group generated revenues of EUR 62.7 billion in the 2014 financial year – more than 60 percent of it outside Germany.