Hamburg Deutsche Telekom has had a record year. Sales increased by 6.1 percent to around 114 billion euros in 2022, the company announced on Thursday. Adjusted profit (EBIT) rose by 22.5 percent to 15.4 billion euros. The net result even doubled to eight billion euros. Telekom benefited greatly from exchange rate effects.
As usual, CEO Timotheus Höttges presented himself very self-confidently on Thursday. He spoke of the “best result in the company’s history”. Telekom is growing “in all customer and financial key figures”. Nevertheless, Höttges promised that he was not yet at the end of his ambitions. “I need action.”
Behind the positive development was once again the success of T-Mobile US, in which Telekom now holds 49.6 percent of the shares. The subsidiary was able to win 6.4 million new contract customers in 2022 and increased the particularly relevant service revenues by 7.0 percent compared to 2021 to 61.2 billion dollars. Compared to the previous quarter, however, there was a small decline here.
Deutsche Telekom: Strong dollar also drives up debt
Due to the strong US dollar, Telekom was able to benefit particularly strongly from growth in the USA. T-Mobile US was responsible for a good 66 percent of Telekom’s annual revenue in the 2022 financial year. Calculated in euros, sales in the USA increased by a whopping eleven percent.
In Germany, too, sales grew slightly last year to 24.5 billion euros. The group was able to grow above all in mobile communications and increased service sales by 2.7 percent to 6.4 billion euros.
Telekom developed better than expected by some analysts. As usual, the development of the IT service subsidiary T-Systems was disappointing, although it was able to increase its sales in the past quarter but fell behind in adjusted earnings. CFO Christian Illek attributed the contrary development to high provisions.
The downside of all successes so far has been Telekom’s high level of debt. Year-on-year, it rose again by 7.8 percent to 142.4 billion euros. According to Illek, around 70 billion euros of this can be attributed to the US business. A large part of the increase can therefore be explained by the strong dollar. Compared to the previous quarter, however, liabilities have decreased.
Despite continued high investment expenditure – last year it was more than 21 billion euros – the board of directors wants to increase the dividend for the past financial year to 70 cents as promised.
Four percent more adjusted profit than target
In the current year, the group wants to earn even more. Höttges promised that operating profit including leasing costs should increase by four percent to almost 41 billion euros in the current year. Telekom wants to further expand its networks and now create around three instead of 2.5 million new fiber optic connections in Germany. This is “our internal level of ambition,” explained the CEO.
Telekom also wants to invest in additional shares in T-Mobile US. By 2024, she must have reached a stake of more than 50 percent in order not to lose control of the daughter. So far, Telekom has exercised this via a limited-term agreement with its Japanese partner Softbank.
Höttges also commented on the debate about a new version of the so-called service provider obligation. Politicians in the traffic light coalition want to reintroduce this as part of the upcoming frequency auction in order to allow competitors such as Freenet or 1&1 regulated access to the networks of Telekom & Co. This is intended to increase competition, which could lead to falling prices.
>> Read here: How the telecom industry ripped off the federal government
Höttges spoke out against such a regulation. Rather, he assumed that 1&1 boss Ralph Dommermuth could use them to ultimately not build their own network. The company from Montabaur is currently in the process of building a technologically particularly ambitious 5G network, but has so far fallen far short of the goals it has set itself. 1&1 has not even remotely fulfilled the corresponding requirements of the Federal Network Agency.
Timotheus Höttges welcomes debate on succession
With regard to his position, Höttges sent mixed signals: on the one hand he emphasized the “commitment” to his current five-year contract, on the other hand he welcomed the already smoldering debate about his successor. “I shouldn’t be the Methuselah limping through the walls,” he said jokingly.
Recently, voices had been raised that, in addition to the German board member Srinivasan Gopalan, the technical board member Claudia Nemat was also brought into play as a possible successor.
>> Read here: Deutsche Telekom prepares to say goodbye to boss Höttges – and apparently has a successor solution
Among other things, Telekom parted with its Dutch business last year and sold the majority of its radio tower portfolio (GD Towers). That is why Telekom uses a pro forma value from the previous year as the basis for the forecast. On this basis, the free inflow of funds is expected to increase by at least 40 percent from EUR 11.2 billion to more than EUR 16 billion.
The T-Share, which was quoted at EUR 21.20 on Thursday afternoon, recently experienced a surge and broke through the EUR 20 mark for the first time in more than twenty years in mid-January.
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