8. Christian P. Illek on Finance – Deutsche Telekom's Capital Markets Day 2021 #DTCMD21

We have really liked the presentation so far. I think we have shown a very high level of ambition, both on the commercial side and the financial side. But now it's time to roll it up to consolidated financial figures. I will use the same approach as my colleagues: a quick review of the past three and a half years, then give the outlook. Key messages: One, we delivered on our 2018 Capital Markets Day commitments – on capex, cost reduction, you can trust us. Two, looking forward, we see top-line and even stronger bottom-line growth across all segments. Three, we announced another €1.2 billion cost reduction program for European operations, and the US team is increasing efficiency through faster synergy utilization. Four, on leverage, after IFRS 16 we changed the comfort zone to 2.25–2.75x; we will return by end of 2024, with the delay purely explained by the shareholder remuneration program and our ambition to achieve majority in the US. Five, on dividend, we remain reliable, keeping adjusted EPS as the key metric, a floor of €0.60, and moving to a 40–60% payout corridor; dividends will be progressive. Six, we are reliable to debt holders with strong liquidity and unrestricted access to credit markets. Reviewing the past: EBITDA guidance of 2–4% growth, we ended at 4.4% (core EBITDA 6.4%). IDC reductions: we beat the €1.5 billion target by €200 million, driven by Germany, Europe, and T-Systems. Headcount in Germany reduced by 17,000 from 2017–2021, saving €1.2 billion gross. Real estate savings of €300 million. Free cash flow: we targeted >€8 billion by end of 2021; we will achieve the upper end of the merger scenario at >€8 billion, with €3.6 billion from Europe and €4.5 billion from T-Mobile US. Adjusted EPS growing from €0.90 to >€1.10. Dividend: we maintained a reliable payout of €0.60–0.70 over the past three and a half years. Total shareholder return increased 41% since the last CMD, beating the Euro Stoxx and DAX by a factor of two. On leverage, we still plan to return to the comfort zone by end of 2023, but IFRS 16 and the delayed merger closing push that to end of 2024. Guidance: we raised EBITDA and free cash flow by €200 million each for 2021, equally split between US and XUS. Looking forward to 2024: free cash flow growth from €6.3 billion in 2020 to >€18 billion, a 30% CAGR, with T-Mobile US contributing >€14 billion. At 50.1% majority, DT shareholders would get ~€10.5 billion, or >€2 per share, >100% increase. Adjusted EPS from >€1.20 to >€1.75, a 10% CAGR, with linear growth. Return on capital employed (ROCE) from 4.6% to >6.5%, surpassing our cost of capital. US: EBITDA from €21 billion to €27–28 billion (7% growth, core 10%), cash capex peaking in 2021, free cash flow massive. Europe: steady EBITDA growth from €14 billion to €15.3 billion, supporting capex of €8.2 billion, with balanced contribution from net margin and cost reductions. Capex commitment: €8.2 billion envelope for fiber and 5G. Digitization: holistic approach across front and back end, with programs tracked from 2020–2024; examples: e-sales share to reduce sales costs, IP migration improving product and reducing energy. IDC cost reduction of €1.2 billion additional, bringing indirect costs from €17.5 billion to €16.3 billion, with levers in real estate, IT simplification, joint ventures, and overhead reduction. Finance strategy: reliable dividend payer, share buyback authorization (not likely soon), ROCE above cost of capital from 2022, debt comfort zone maintained, liquidity covering 24 months of maturities. Dividend policy: moving from EPS growth to a payout ratio; given 10% EPS growth, dividends will be progressive. Leverage: back in comfort zone by end of 2024, with shareholder buybacks in US continuing into 2025 and beyond. Maturity profile balanced at €3.6 billion per year, with €4.7 billion from US. ESG: supplier code of conduct, sustainability-linked bonds, enhanced transparency, and DT Trust focused on ESG investing. In conclusion, massive bottom-line growth: free cash flow 30% CAGR, EPS 10% CAGR, ROCE +2 points. This allows shareholder returns from T-Mobile US totaling up to $60 billion, aiding our path to 50.1% majority. We are committed to deliver as before.