Shareholder's Meeting: Dividend of EUR 0.62 proposed - net debt below 1999 level - Excellence program consistently focused on the customer.
Deutsche Telekom closed the 2004 financial year continuing its course of profitable growth and gearing itself to the industry's new strategic challenges. "2004 was a positive - even extremely positive - financial year", said the Chairman of Deutsche Telekom AG's Board of Management, Kai-Uwe Ricke, at the Shareholders' Meeting in Hanover. "We have clearly increased revenue and earnings." A dividend of EUR 0.62 per share was proposed to the Shareholders' Meeting. A three-year strategic program, the so-called Excellence program, is designed to drive forward profitable growth.
Merger as key element of strategic realignment According to Mr. Ricke, the industry is marked by tremendous technological change. He continued, new markets are developing, traditional business areas are losing importance, and barriers to market entry are falling. Against this backdrop, the merging of T-Online with Deutsche Telekom is a "key element in our strategic realignment." Mr. Ricke went on to say that, "in turn, this means that it is only possible to address the market and customer needs in an optimum way through integration at the company level. Without the integration of the broadband fixed network and the Internet, a wide range of new products and services would not have been possible in the first place."
Looking back on the financial figures from 2004, the Chairman took stock of a positive year: Deutsche Telekom increased its net income to EUR 4.6 billion, following EUR 1.3 billion in 2003, and increased revenue by 3.7 percent to EUR 57.9 billion. Net debt fell by EUR 11.4 billion in 2004, to EUR 35.2 billion. This level at the end of 2004 meant that Deutsche Telekom has even fallen below the level of debt in 1999. This was achieved primarily due to free cash flow and the sale of investments. "Free cash flow increased by almost EUR 2 billion to EUR 10.2 billion. We can be proud of this accomplishment, as this cash flow is mainly generated by our operational business," Mr. Ricke emphasized in his speech to the shareholders.
After deciding not to pay a dividend to shareholders for the 2002 and 2003 financial years, the Board of Management and Supervisory Board proposed to the Shareholders' Meeting a dividend payment of EUR 0.62 for 2004. As to the company's future policy on dividends, Mr. Ricke said that the dividend for the 2004 financial year will serve as a guideline for future dividends, depending on the development of profits.
Success of HR and quality initiatives evident In order to secure the Group's growth in the future too, the Board of Management initiated a structural realignment in the 2004 financial year. With Agenda 2004, which was presented to shareholders a year ago, the company launched initiatives for broadband, business customers, human resources, quality, innovation and efficiency. Speaking of the quality initiative, Mr. Ricke reflected at the Shareholders' Meeting that it has enabled Deutsche Telekom to lay "important foundations for clear improvements." With the customer promises we published recently, we are giving "our customers quality indicators that they can rely on. It is our firm intention to keep these promises."
In reference to the success of Agenda 2004, the Chairman highlighted the HR initiative in particular. As early as spring 2004, Deutsche Telekom managed to conclude an employment pact regarding the reduction of weekly working hours for around 100,000 employees with only a partial reduction in pay. In doing so, existing work was redistributed and employment secured for around 9,800 employees. Indeed, it was possible to extend the period of exclusion of compulsory redundancies until the end of 2008.
"One of our main aims is to open up new career opportunities for those employees affected by staff-reduction measures," explained Mr. Ricke. Accordingly, the Group's own personnel service provider, Vivento, is continuing to develop successfully. Around 84 percent of the 18,300 employees accounted for by Vivento at the end of 2004 were either in employment or taking part in targeted further training measures; 10,000 employees found new jobs in the form of temporary work or projects. Roughly 4,600 employees work in the Business Lines established by Vivento in the call center and installation business. Of the just under 31,100 employees originally transferred to Vivento, 12,900 have left Vivento again. There will be no further job cuts at Deutsche Telekom AG in 2005. According to Mr. Ricke, "We will, of course, stick to this moratorium, which is part of the employment pact agreed upon with our social partner." He maintained, however, that Deutsche Telekom must face up to the fact that radical changes will continue to be imposed on the industry as a result of rapid technological change, regulation and more efficient processes. Mr. Ricke did, however, say that, "We will continue to show a great deal of responsibility in everything we do."
Excellence program to secure profitable growth At the beginning of 2005, Deutsche Telekom consistently realigned its Group structure to fit market requirements: in an evolutionary step away from its former 4-pillar structure, the Group has now realigned itself to three strategic business areas. Mr. Ricke announced: "We assume that the initial results will become apparent as early as 2005." In order to continue along the path of profitable growth, the Board of Management has initiated the Excellence program. The aim of this program is to make the Deutsche Telekom Group the fastest-growing integrated provider in Europe. "We are placing excellence in the eyes of the customer at the heart of our actions, thus increasing the return on capital employed in a sustained manner," explained Mr. Ricke. "Excellence means that we want to be better than the competition in those areas which our customers consider important."
In 2005, Deutsche Telekom expects adjusted EBITDA, accounted for in accordance with IFRS, to be between EUR 20.7 billion and EUR 21.0 billion. The Group plans to invest between EUR 7.5 billion and EUR 8.0 billion in property, plant and equipment and expects to generate the same amount of free cash flow. Deutsche Telekom expects additional cash outflows as a result of the acquisition of additional mobile communications licenses in the U.S. and the reintegration of T-Online.