Deutsche Telekom's Q3-2026 Investor Conference Call - DEUTSCHE TELEKOM AG

Explicit Guidance:

• 2026 Full-Year: Raised group EBITDA guidance to ~€47.6 billion; raised group Free Cash Flow (FCF) guidance to ~€20.1 billion; adjusted EPS guidance remains at €2.20. Ex-US EBITDA guidance remains at €15.4 billion (in line with €15.5 billion consensus).
• 2027: Proposed dividend increase of 10% to €1.10 per share (payable in 2027); planned share buyback of up to $2 billion in 2027.
• Dividend Policy: Stated payout ratio remains 40–60% of adjusted EPS.
• AI Efficiency: Targeting €2.5 billion in gross cost savings by 2030 via AI integration.

Business-Segment Outlook:

• Germany: Returned to positive broadband net additions in Q3 2026; fiber net additions reached 190,000 (+23% YoY) with penetration at ~18%; broadband revenue growth accelerated to 2.8%. Expected to return to EBITDA run rate >2.5% in Q4 2026 after a Q3 dip.
• United States (T-Mobile): Postpaid account growth stable at +4.2% YoY in Q3 2026; service revenue growth remains strong. Monitoring potential MVNO agreements with satellite providers but currently rejecting arbitrage models; no current discussions with Tesla regarding network slicing.
• Europe: Organic revenue and service revenue growth >4% in Q3 2026; Poland identified as a standout performer in net adds; acquired €1 billion Polish fiber asset to strengthen fixed/mobile convergence.
• T-Systems (B2B): Order entry reached €900 million in Q3 2026; momentum strong in public sector, defense, and digital solutions; industrial cloud factory expansion in southern Germany announced.
• Broadband & Fiber: Aggressively expanding fiber footprint organically and via acquisition; acquiring insolvent fiber assets in Germany (e.g., Ruhrfiber Essen, Metrofiber) to integrate passive infrastructure; open to wholesale passive access deals with competitors where economically beneficial.

Market and Competitive Outlook:

• Satellite Disruption: Dismissive of satellite-only substitutes for terrestrial mobile in the near term (80% of calls indoors; spectrum bandwidth constraints); asserts SpaceX requires minimum €200 billion+ investment (spectrum + towers + network) to compete.
• MVNOs & Pricing: Rejects regulatory pressure to open MVNOs to satellite players in the US or Europe; views MVNOs as useful for new customer acquisition but not for pipe filling.
• Huawei & Tech Sovereignty: Opposes accelerated removal of Huawei equipment in Germany, citing high costs and potential delays in 6G readiness; notes current network is already largely free of Chinese core/optical equipment.
• Competition: Differentiating on quality and value rather than price; maintaining pricing discipline in Germany and US despite MVNO pressure.

Macro / Industry Outlook:

• European Economy: Foresees fragile recovery in Germany with GDP growth of 1.3% in 2026 and 1.1% in 2027; B2B outlook supported by public sector, health, and defense sectors ("sovereignty" trends).
• Regulation: Anticipates potential support for European telecom consolidation and resilience via the Digital Network Act and spectrum extensions; views current market fragmentation as a barrier to competing with US tech giants.
• Component Costs: Facing inflation in chipsets and optical cables; mitigating via internal standardization (e.g., server demand, cable types) and supplier pressure.
• FX: Exchange rates remain a factor; ex-US guidance calculated based on current FX assumptions.

Strategic Initiatives:

• M&A & Partnerships: Completed acquisition of €1 billion Polish fiber asset; acquired smaller German fiber assets in insolvency; announced joint bid with three European operators for European Satellite Spectrum; formed US satellite coverage joint venture (T-Mobile led); expanding industrial cloud factory in Germany.
• Network Expansion: Accelerating fiber rollout in Germany while competitors slow; leveraging AI for workflow efficiencies and customer experience; increasing spectrum holdings (380 MHz in US; exploring 20 MHz MSS in Europe).
• Shareholder Returns: Combined 2026/2027 shareholder return yield of ~6% (€1.10 dividend + $2B buyback); buyback strategy linked to leverage targets and spectrum investment needs; no rollover of unspent 2026 buyback volume into 2027.

Risks and Headwinds to Outlook:

• Satellite Competition: Acknowledges SpaceX/Tesla as a "new category" and serious long-term threat requiring intelligent strategic response; risk of disruptive technology changes the communications ecosystem over 5–10 years.
• Regulatory Uncertainty: Potential regulatory intervention in Germany regarding Huawei removal or market consolidation; risk of MVNO pressure from regulators or competitors.
• Cost Pressures: Component price inflation (chipsets, optics) and high cost of network build-out (fiber/spectrum).
• Market Dynamics: High MVNO saturation in Germany suppressing price increases; potential slowdown in European service revenue due to the end of the Greek-European recovery front.
• Execution Risks: Challenges in securing landlord permissions for MDU fiber deployment (though new legislation expected to help in 2027).

Management Tone on the Future:

• Confidence: High confidence in ability to defend market position and business model; emphasizes 40 consecutive quarters of EBITDA growth in Germany and 35 in Europe.
• Stance on Disruption: "Not panicking" despite market fears; urges focus on execution and "delivering on strategy"; views competition as a validation of their network leadership.
• Share Price: Explicitly states the share price is "very cheap" and "not reflecting a fair value" of T-Mobile US; expresses dissatisfaction with current market multiples.
• Guidance: Upbeat on 2026 upgrades; cautious but optimistic on 2027, prioritizing financial flexibility for strategic opportunities (spectrum, M&A) over maximum buyback volumes.

Miscellaneous:

• Leadership Successions: Announced Dana Jai as new CFO successor; hired Jan Hofmeyer (from AWS) for product and technology leadership.
• Investor Relations: Reiterated commitment to delivering on promises despite "fear in the market."