Deutsche Telekom to become the leading, most innovative company in its industry - Focus on debt reduction and earnings-oriented growth - The four divisions continue development of their brands - Ricke declares openness for transparency - T-Com trims product portfolio to around 20,000 items - T-Mobile continues to expand multimedia services - New organizational structure for T-Systems increases strength and customer orientation - T-Online taps existing customer base further - Revenue increased to EUR 13.6 billion in first quarter of 2003 - Consistent reduction of debt by around EUR 8 billion - Ricke: At least break even for the 2003 financial year Deutsche Telekom is to become the leading innovative service provider of the information and telecommunications industry. This was Kai-Uwe Ricke's message at Deutsche Telekom's 2003 Shareholders' Meeting in Cologne, underlining the Board of Management's new course. The chief objective is to reduce the level of the Group's debt. At the same time, Mr. Ricke emphasized the particular significance of the company's new corporate and management culture: "It is particularly important for me to face our shareholders and employees with openness and credibility. The only way for us to progress successfully with the restructuring of our company is to generate the necessary transparency", said Kai-Uwe Ricke.
Mr. Ricke particularly emphasized three points necessary for achieving the Group long-term goals and for generating earnings-oriented growth: quality, innovation and efficiency.
"Most important for me is not how we see ourselves, but how our customers see us; how satisfied our customers are with the quality we produce. One of our goals is to tighten production planning for new products; at the same time, we will invest our budgets for innovation, research and development in primary growth areas. At the center of our efforts is data communications", said Mr. Ricke, Chairman of the Board of Management of Deutsche Telekom in Cologne. "In all our efforts, we must not lose sight of costs. They must not in-crease in parallel with our growth - on the contrary. If we are to increase our profitability, they must continue to fall. And we can only achieve that by constantly improving efficiency."
These are the parameters within which the four divisions are to further develop their product brands: T-Com is to become one of the leading fixed-network communication providers and further expand its role as a pioneer. T-Mobile will extend its position as one of the leading companies in the mobile communications sector worldwide. T-Systems will make its mark as one of the most innovative companies in the IT and telecommunications sector, providing solutions for systems customers. T-Online will further consolidate its role as the leading Internet Media Network and continue to expand its customer base.
T-Com : Setting new standards in the fixed network T-Com is to sharply increase its value created through organizational measures, for example: This includes placing greater emphasis on the Internet as a distribution channel. Deutsche Telekom almost doubled the number of sales transactions made on the Internet in the first quarter of 2003. The number of product variants was cut from around 44,000 to approximately 20,000. This portfolio streamlining leads to the simplification of processes and represents an active contribution to the reduction of costs and the maximization of cash flow. T-Com will strengthen its market position with products and services which are clearly focused on the customer.
A prime example is T-DSL: 3.5 million Deutsche Telekom customers already use T-DSL. New customer groups are being tapped with additional features. One example of this is Fast Path, an application for players of online games. Wireless LAN will become particularly important in the coming months as part of an intense sales drive and will support T-Com's broadband campaign. The "WIN" project was launched in order to set in motion processes designed to improve efficiency. Approximately EUR 900 million is to be saved in the course of the year, mainly by reducing material and personnel costs.
T-Mobile : Leading mobile communications company in the international arena
T-Mobile will continue to expand its position as a leading mobile communications company on the international stage. The company's goal is to achieve cash-oriented, value-based growth. Cooperation between T-Mobile's companies in the individual countries is to be further optimized - for example in the field of network planning. A further focal point is the expansion of the provision of top-quality multimedia services under the t-zones brand. As part of T-Mobile's multimedia strategy, UMTS, along with GPRS, plays a particularly important role in the further development of the mobile telecommunications market and the continued value-based growth of the company. The focus also continues to be on the further development of the business customer market. Special business solutions are to further increase non-voice revenues.
T-Systems : Sharper focus and partnerships With its T-Systems division, Deutsche Telekom will continue to consistently expand its role as one of the leading providers of IT and telecommunications solutions for systems customers. T-Systems has been reorganized with this goal in mind. The sales and service units have been vertically structured in line with four industry segments: telecommunications, services and finance, public and healthcare and manufacturing. Effective cost management in all areas of its business has been specifically designed with the aim of improving results to the order of EUR 500 million. Measures to achieve these goals include the consolidation of computer centers or partnerships, for example in the field of purchasing.
T-Online: Further tapping of customer base
T-Online is to take a more rigorous approach to exploiting the potential within its existing broad customer base in order to achieve higher revenue and in-come. Its range of paid content in particular is to be expanded considerably. The aim is to further reduce the company's dependency on pure Internet access business. At the same time, growth in broadband lines is to be increased further. T-Online will consistently build on its role as a leading Internet Media Network.
"Innovation, quality and efficiency are the maxims for all divisions", said Kai-Uwe Ricke, Chairman of the Board of Management of Deutsche Telekom, in Cologne. "We deal not only with infrastructure and products, but also with services and solutions for our customers. Our goal is to generate value-based growth in the coming years and our focus has to be on the key economic figures. The divisions will play a particularly important role in this context."
Turnaround: Getting back on the road to success At the end of the first quarter of 2003, Deutsche Telekom can look back on the significant results generated by its chosen course of restructuring: Revenue increased by 6.6 percent to EUR 13.6 billion. Adjusted EBITDA grew by 18.4 percent to EUR 4.5 billion. Free cash flow rose from EUR 0.3 billion in the first quarter of last year to EUR 2 billion. Debt amounted to EUR 56.3 billion at the end of the first quarter of 2003. This means debt was reduced by around EUR 8 billion in the last two quarters, from the previous level of EUR 64.3 billion.
"As a result of the strategy we have consistently applied to reorganize our company, we are once again in the black. I would like to underline our goal of continuing to report positive figures despite the difficult prevailing economic conditions. We generated net income of EUR 0.1 billion from operations", said Kai-Uwe Ricke at Deutsche Telekom's Shareholders' Meeting in Cologne. "Taking into account asset sales and other special factors, EBITDA was almost EUR 0.9 billion. A comparison with the figures from the same period last year demonstrates just how important this development is for us - in the first quarter of 2002, we recorded a loss of EUR 1.8 billion."
The trend for the remainder of the financial year is expected to be positive. The development of the difficult economic climate must nonetheless be taken into account. Bearing in mind various influential factors, the EBITDA forecast for the full year is between EUR 17.2 billion and EUR 17.7 billion.
Deutsche Telekom reconfirms its target of reducing its net debt to three times the level of its EBITDA by the end of 2003. In order to be able to achieve this ambitious goal, Deutsche Telekom's Board of Management has introduced numerous measures:
- "6 plus 6": Asset sales are designed to generate EUR 6 million to go towards debt reduction. Another EUR 6 million is to be generated from free cash flow.
- Cutting capital expenditure: Investments in property, plant and equipment were reduced by around 30 percent in 2002. An investment range of between EUR 6.7 billion and EUR 7.7 billion has been set for the current financial year.
- Consistent cost savings: Around EUR 700 million was already saved in the second half of 2002. This was achieved by reducing marketing expenditure and consulting costs, for example.