T. Höttges, C. P. Illek and T. Langheim on Q&A- Deutsche Telekom's Capital Market Day 2024 #DTCMD24

So yeah, we're staying here or down you stay here straight away and then we'll be joined by Tim and tooren and the other members of the management team are available for any question that might concern their areas as well. And so now the question is focused of course on finance and capital allocation. I mean Tim, you're actually meant to sit here but I'll do it. Okay, and let's start with Robert.

Yeah hi there, yeah it's working, yeah good, yeah Robert from Deutsche Bank. I'd like to go back to the towers question please. I think toon said you need a significant stake in the future to look after your interests on a consolidation of towers. Assuming you don't put new money in, your stake would fall. So if you're happy with a lot less than 50%, why not 0%? T-Mobile doesn't have any Towers. What is it about having that stake for the long term that protects your interests given you got a cheap stub? Thanks.

Thanks thanks Robert. Look it's a combination of a few things. Number one, it's always good to have a stake in order to protect your own operations and make sure that customer first. That's point number one. Point number two, it's a very attractive asset class and I do believe if there is a market leader, a go-to investment, then this Tower asset would be a go-to where a lot of investors have to spend their money. Thirdly, if you have one successful platform, one team, I learn now a lot from digital bridge and Brookfield of how you can improve operations. If you then roll in other operations, I think that could have a significant benefit. So I believe in two things. That doesn't mean that we need to have majority or control, which we don't have right now, but we need to protect our Network leadership. Number one. You also see that we are obviously very flexible enough to let others on our Towers to make all and everyone happy. Second, I think there is some more juice in the European Tower space if the market is going to consolidate.

Thank you and I forgot to say please restrict yourself to one question now so we can go around again but so we make sure everybody gets the opportunity. Next.

Hi, it's KY from JP Morgan. I've got a question related to the group as a whole and toson is linked to the comments you made around the US. If we look at the last 3-4 years, we've seen the weight of the US in the group continue to scale. We've gone from 62% of EBITDA 4 years ago to 68% today. You've slightly scaled down your European assets and doubled down on the US. If we look at the next three years in terms of what you articulated at the CMD, it's much the same: growth in the US faster, M&A in the US, not in Europe, so we're likely to see the US weight of EBITDA grow above 70% and beyond. I'm trying to understand three things: one, to what extent should we think about this ongoing weight increase of the US? Two, how does that tie into Tim's comments yesterday about T-Mobile buybacks and increasing your stake versus your own buyback? Three, you've talked about the undervaluation, do you think this plays a role that you've got a growing US piece where the minorities are growing? It's a broad question but just to understand how the management team thinks about that.

Thanks. Okay, I start by the way more with the governance question. Look at the end of the day, we have a clear governance. We are the owner of the US and we have a lot of rights in this company guaranteed for the future. Top of that, we have a great strong partnership with SoftBank and Masa and his team, which is giving us impact on these companies. We always look for the growth and opportunities in the US in the interest of the US, and by the way that's a win-win. We do not have kind of conflict here. So therefore the governance is not the issue. We have a clear issue, the question which you have implicitly is: are we always aligned on the way going forward, where we want to go and how we want to go? To be honest, this is always a discussion which I have with Greece as well. We don't earn more shares in Greece as well, and we have to convince our Greek management and our partners there. So far, so good, went pretty well. Take an example: this fiber build-out which we are driving now in the US is 100% aligned with our ambitions which we are doing here. So even it's a blueprint which we had here in Europe which is now used in the US, and that shows that it's more convincing people about what is the right strategy. So I think for my governance rights we're well protected. If something happened, we are the owner of this business and we always try to find an alignment on the strategy. That is so far good. There are always changes in the management have been in the past and will be in the future, but we are always behaving in the interest of the company.

Go ahead sorry it was just on the T-Mob. I just wondered how you think about how we should try and rationalize the T-Mobile stake increase versus just how should we think about that? I thought Christian or toson should say something as well because you know I'm not the only worker here.

David hey guys it's David from Bank of America again. I've got two so I've got to choose one of them here. Uh ahead so my understanding Christian is your 2 and a half EUR 2027 EPS two and a half Euro cents includes the benefits of the allocation of 15 billion and the single most important driver of your share price historically it's not the stub trade it's the dividend yield right? I think that's been proven we broadly agree. So the dividend the most important thing in 2027 that dividend paid on this EPS number which has 15 billion of benefits which you won't explain so it's quite hard for us to understand how to get that 2 and a half Euro cents when you're saying there 15 billion but you won't tell us what you're going to do with it so can you give us how do we think about that?

Um if we think about today's share prices this is maybe a question as well for the rest of your management team which side of the fence are you tipping over? More DT share back or more T-Mobile shares?

Next is Josh.

Thanks, it's Josh Mills here from BMP power bgs an so the T-Mobile team yesterday made the point that whilst their financial targets are ambitious they don't include all of the upside from the even more ambitious operational targets and I think Claude you're earlier was also mentioning that there could be additional upsides in areas like AI. So my question is how conservative is the guidance that you've been presenting over the last few days on the XUS business and what would be the two or three big swing factors to think about over that period which will determine whether you end up at the low or the high end of those ranges?

Mathieu from Barclays.

Mat mat from barklay so um team in your presentation yesterday with beit you highlighted the need to have a strong succession pipeline in terms of the management so I guess you know where I'm going and hopefully you find out a legitimate question since your guidance today is until 2027 I think your mandate ends 2026 so maybe can you tell us should there be a succession plan at Deutsche is there one and that's a question we get asked a lot.

Look, my contract runs until 2026 and I hope that I'm coming across that I'm fully committed for the team and for the company. I'm working for 25 years so maybe it's more difficult to get me out of the company than keeping me in the company because I am the company to a certain extent. Now that said, there is an end to everything. And therefore everybody is well advised to have a proper succession. There's a proper succession plan in the supervisory board with regard to my role and a discussion on this one. And by the way there's a discussion for every single member, not only for this team here but as well for all the B and for all the T3s which you saw yesterday. I hope that we were able to give you an impression about how talented our slate is with the ones you have seen during the days because that was exactly the purpose of not always showing the same faces but showing as well our young leaders here in this team. So look, Napoleon was once asked, what is this trick, what is this strategy to win so many battles and how he's looking into the future, and he said 'we engage and then we will see.' And by the way that sounds very ble but there's a lot in it. First is the word 'we' – it is not me, it is the team. This team is outstanding and by the way this team is making the difference from Seattle to Greece, from Bonn to Vienna. The second is 'engage' – if I'm engaged and passionate like always, it doesn't move the needle; it needs 200,000 people to win the battle. And then 'we will see' is the next thing – without engagement you should not go anywhere, but then you should not become too dependent on what's happening in the future. If something is happening in this company big style, big things where the company needs me, I'm always around. And if there is a time when the organization comes to the end that it is time to have a new leader, I'm ready to go as well. So I think this is a good and healthy succession for this organization. Today I see myself here for the next years until 2026, fully motivated with a great team, and then we will see.

Going over to the side, Polo first and then.

Just have a question in terms of your change in terms of leverage. So why have you decided to maintain leverage at the current level of 2.75 times versus previously you were guiding towards 2.25 to 2.75 times? Do you think this leverage level is high compared to your per?

Great. Usman, thank you.

Usman thank you it's a small from bburg um just on your return on Capital for this year which is around 6 and a half. Now I mean you know the German unit is generating around 8, Europe at 9, the US if I calculate it is going to be around 6 and a half but going up to 10 over the next couple of years. So you know are there some costs that are not being accounted for within the units or is something really negatively returning capital?

Great. Otavia?

Otavia actually I probably follow up from this one. On the presentation ton you said that 2010 the emphasis of D on ROCK would have been quite significant different from the others and then you show the market cap of the company that's triple but when someone look at the ROCK of D Telecom 2010 and ROCK now not in 3 years time it's only going up by 150 basis points but the market cap has done terribly better. The business with the lowest ROCK is actually the one most valuable to you and the one has actually created more value. So it looks like it's probably ROCK the one that the market is looking at is growth. So therefore to Christian the question is your 15 billion headroom you put buyback of T-Mobile buyback of DOA everybody is trying to get a bit of a grasp but it's good for EPS not really does anything to the structure of the company which if you look at the company last 12-13 years you've been brave enough could Sprint even if ROCK was very dilutive. So my question is in those 15 billion there is only emergency if you there something else happened or any other things you can do it will be done on the gearing or you will still use this 15 billion as an investment that could be fiscal investment like fiber could be M&A if you can just clarify this 15 billion as the umbrella.

I will talk about the operational business. This guy is going to talk about M&A which he doesn't comment.

I think the other point to make is of course the hypothesis is unproven whether our 50% planned increase in Roki over the next 3 years will make a difference, so let's see. To that we also have 4% revenue growth and it excludes a lot right. You know the 30 billion that T-Mobile for instance hasn't committed. I should also say that we do have retained some strategic flexibility and therefore if we see opportunities that are more interesting than our share buyback or buying more T-Mobile then we also have flexibility for that. So maybe how I see that and maybe to understand the question, look this is a little bit the price of radical transparency. We could have hidden that somewhere and saying suddenly we do M&A or suddenly we do something on the ration. Miracle-wise, we put 15 billion on the table. We want to be very transparent that we have this reserve. The second is it is a signal of the conservatism of our plan. We want to give confidence to investors that we are able to achieve the numbers which we have laid out, which are more ambitious than most players in our industry, so it shows the conservatism of the plan. The third thing is it is as well asking for trust that the way we look on the possibilities should follow the logic of where do we get the best bang for the buck, the best internal rate of return. This is the question which we have. We don't say it's all going into share buybacks and we don't say it's going all in dividends and we don't say it's going all in M&A. It's going that this company has a strategic flexibility to do the right things for its shareholders to be creative. That's the way. We will do this as we do with the 15 billion now in a transparent way. It's a very mathematical and transparent process to say the share buyback in the US were very creative percentage wise if you look back and was the right thing to do even if some of you have thought maybe the share buyback in Germany would have been the better way. I think it wasn't, it was the right decision we took. Now the same is true for M&A. We haven't done any big M&A. I cannot recall when the last big M&A was, UPC in Austria or maybe in the US now some activities there, but in Europe we haven't done any big things yet. So we have a lot of company money in the capex envelope on fiber and we are very clear about what we want to do in fiber. So I do not see that we are hugely extending it except we see that the business case is improving there but that requires a lot of elements. So therefore keep it as a transparent open issue. Trust us that we are not making bad deals. We haven't made a bad deal in the last 10 years or 15 years. I cannot even recall when we made the last bad deal. Oh there is one but okay I don't remind us on this one, but this is long time ago. Therefore it is a matter of trust which we need here.

Good okay. James and then I come back over here.

Yes thank you. So Christian I think you said the most important slide in your presentation was the one where you showed the billion surplus. I think one assumption you didn't show there was what you're assuming for your kind of baseline participation in the T-Mobile share buyback. So is it to assume that you would just be participating prorata in the kind of baseline assumption? Because if that's the case I think you also said yesterday you wanted to get to a stake of T-Mobile in the high 50s.

Got it okay so that partly answers my question thank you for that but then is the baseline assumption in to get to the 15 billion surplus is you just participate prorata to your stake? No what is the assumption then please?

Correct. Okay next.

Adam uh thank you it's Adam from HSBC. I'm interested in whether there was a discussion about increasing the dividend payout policy in your preparation for today and related to that what kind of circumstances do you think would take you back down to paying out in the low end of the range given you're in the middle of the minute?

Okay. EMT.

Yes um it's EMT Morgan Stanley. Just a quick question please on the kind of geopolitical environment that we see in Europe. So we've had a new European Commission appointed very recently still headed up by Miss Vanderlan but we've seen Miss Vestager leave the stage and she's been replaced by Miss Ribera of Spain. It looks like there's going to be a much bigger emphasis on the environment and even a tie between the environment and potential competition law. We've also seen a big paper published by Mario Draghi as well. So do you think we're now entering a new era and what would the potential impacts be on your business in Europe?

Look, we should not expect that the whole world is changing overnight. It will be a process. It's definitely encouraging to see what's happening, and it is not starting only with the new commission, it started already with Macron and Scholz in amber talking about the need for consolidation of the European market, for a single digital market. As an example they took the consolidation of our industry as a must-have. There's this discussion in the Draghi report which is clearly addressing the need that aside from focusing on consumer prices there is a need for the capability to earn the money back which is invested and that this industry is suffering. There is this white paper for digital infrastructure prepared by the last commission which is getting to the agenda immediately now, which is supporting our positions. Mr. Lettera has made another report which is supporting it. So I think we are getting through with our messages now. Finally now the question is how fast Madame Ribera is reacting on this. By the way she's very powerful because she's not only taking the Vestager job, she's also taking the digital site, so she has a lot of power and no compromises needed between two commissions anymore. So it is a new era. I'm looking forward to this one. As I said yesterday, don't forget guys, why is this industry growing? Because regulation has not gotten worse. The industry is finding mechanisms to improve their revenues while the setup of the regulation stayed stable over the last years already. So I would say we have seen the bottom and now I'm encouraged that we see improvements. Maybe last comment: the fair share debate is going on. The actions against Apple and Meta are on the top news every single day. The European Commission is clearly decided to do something about this bipoc or the remobilization of the digital market here in Europe because they see there will be a loss of sovereignty for European citizens if they don't act. So I'm encouraged about that as well. I'm not a big fan of regulation, but if you can't fight the dragon you have to ultimately regulate them. So we are fighting for fair share and our discussion against Meta here in this case we will not stop on this one. I hope that there is now a change which is materializing immediately into some legislative actions as well.

Okay. Stefan? Oh Andre sorry.

Andre thank you Andre from Kepler just going on on regulation a bit more and decline that into Germany moving forward especially in the process of extending the Spectrum rights but also regarding the surface coverage in Germany for that to be put in place there requirement for sharing Spectrum with oneon-one etc. How do you see like maybe the EU winds declining also into the German environment and how do you see it like maybe moving forward? Do maybe some consolidation or something around there that could happen in Germany? Thank you.

Okay I think we are at the end of the Q&A and also at the end of the capital markets day. So before Tim has some final remarks, I wanted to do a few logistics notes. First, thank you all for coming here and asking.