Deutsche Telekom AG (DTEGF) Q2 FY2026 earnings call transcript

Hannes Wittig

Head of Investor Relations

0:00:00

Welcome to Deutsche Telekom’s second quarter 2026 conference call. Joining me today are our CEO, Tim Höttges, and our CFO, Christian Illek. Tim will begin with an overview, followed by Christian, who will take you through our quarterly performance and group financials in greater detail. After this, we have time for Q&A. Before handing over to Tim, please take note of the usual disclaimer included in our presentation and shown here. Also, please be aware that this conference will be recorded and uploaded to the Internet. Now it is my pleasure to hand over to Tim.

Yeah, thank you, Hannes, and welcome everybody here today. I’m happy to present another set of strong results, and a material step up in our returns to shareholders. Let me quickly start with a snapshot on the results. Our group organic service revenue is growing by 3.9% in the first six months. Organic EBITDA is growing by 7.4%. Adjusted EPS is growing by 10.3%. Customer growth remains strong and peer leading in all our markets. It’s a broad development which we have across the group. We raise our group free cash flow guidance today to reflect T-Mobile’s guidance increase you have seen. We have clear line of sight for our capital markets growth targets, and we all in a very positive mood here. Clearly, while we are delivering, there has been significant volatility for our shares.

I want to address some of this volatility in my prepared remarks today. I will not go through my usual charts today. They should be modestly self-explanatory. Instead, I will go through the four segments before coming to our capital allocation. The common thread for this are three themes. The first, we deliver strong and reliable growth. Second, we invest in our future profitability. Third, we allocate capital to grow our value per share. Let me start with T-Mobile. T-Mobile remains the clear growth leader in the U.S. Organic EBITDA growth based on IFRS was 9.6% in the first half of this year. T-Mobile added half a million accounts in the first six months, well on track for its full year target. T-Mobile has established network leadership based on its superior spectrum position. This translates into ARPA opportunities. T-Mobile’s ARPA growth is peer leading.

At the same time, postpaid phone churn has come down to 0.85 last quarter. Our focus is on quality, on quality growth, and you can see that in our numbers, our strategy is paying off. Looking forward, T-Mobile’s company privileged growth opportunities are fully intact. This is rural, this is B2B, and this is fixed wireless as the main areas. T-Mobile is investing. We are investing in digitization to drive efficiencies and customer experience. We are investing into UScellular integration to drive attractive synergies, and we are investing in attractive fiber opportunities, we are investing in wireless technology leadership with evident results. As my colleague Srini said on the call, we are looking to forthcoming spectrum auctions as an opportunity to further cement our leadership position. Next, let me talk about Germany. In Germany, we are delivering with our 39th quarter of consecutive EBITDA growth.

We are investing in our future profitability and our networks are market leading, and we keep investing ahead of the competition. We systematically leverage AI to drive additional efficiencies. Our mobile leadership is uncontested and further strengthened by our ongoing network modernization. We are delivering strong and consistent customer and service revenue growth, and by the way, even market share gains. The broadband market, however, is more challenging, and we lost some subscribers this quarter. A key driver to this development is the fiber penetration alongside fiber homes passed. We are seeing steady progress here with 161,000 fiber net adds this quarter. As a priority, we will substantially accelerate this run rate, and with it, our fiber monetization. Positively, our broadband revenue growth improved this quarter, and we are expecting further improvements in the coming quarters. Moving on to Europe. Our European segment delivers like a clockwork.

4% organic service revenue growth driven by consistent customer growth each quarter. 4% organic EBITDA growth this quarter, which is the 34th consecutive quarter of organic growth. We’re investing in networks and customer experience. We are also integrating platforms to drive synergies across the footprints and making good progress, thanks to Christian, on network at scale. Our European business demonstrate that the whole can be more than the sum of the parts, as we have promised. Last but not least, T-Systems. T-Systems is delivering strong and steady financial results. It has become a strategic asset for Deutsche Telekom. We are very lucky with all this sovereignty discussion to have the leading IT company here in Europe under our roof. Demand for a sovereign cloud, demand for secure digitization, demand for AI applications and infrastructure is growing, and T-Systems is our lighthouse to take advantage of these opportunities.

In summary, we are delivering. Our EBITDA growth is best in class and our earnings per share, the growth is double digit. Our cash flows are strong and our leverage is prudent. We are investing to maintain and extend our strong growth into the future, where we face challenges ahead. We act. This brings me to our capital allocation. Our capital allocation remains disciplined and focused on accretion for our shareholders. Accretion as measured by adjusted earnings per share. As you know, we are not selling into the T-Mobile share buyback this year. Our T-Mobile stake therefore increased to 54.3% by July, up two percentage points from one year ago. We have been steadily executing our existing EUR 2 billion share buyback program here on the European side, and today we are topping this up.

In addition to our ongoing share buyback, we are today proposing an additional share buyback facility of up to EUR 3 billion on top in 2026 alone. We have seen exceptional volatility in our shares in recent months. Our shares have traded at the bottom of their long-term valuation ranges and do not seem to reflect the growth opportunities we see. We are taking actions now and step up our share buyback program. Buying back our undervalued shares is an excellent investment consistent with the capital allocation framework we outlined in our 2024 Capital Markets Day. At our cost of capital, buying back our shares drives attractive accretion to earnings per share. Why this magnitude? Because it can drive meaningful accretion to our adjusted earnings per share. Why not more? Because discipline always goes both ways.

We want to take advantage of any excessive discounts, but we will not put our network leadership, our spectrum flexibility, our A-rating, or our strategic flexibility at risk. Why up to? Because we buy value. For us, the share buyback is an investment. It’s not volume at any price. The bigger the gap to intrinsic value, the more attractive is the share buyback for us. Our dividend remains the reliable foundation of our shareholder remuneration. The buyback is a flexible complement to leverage exceptionally valued discounts in the interest of our shareholders. The additional facility increases our total shareholder remuneration in 2026 to almost EUR 10 billion if it is fully utilized. This is, by the way, the highest ever. As Christian will show you later, with our leverage ratio well below our stated 2.75 target, we have the balance sheet headroom for this additional facility.

I have now spoken about what we are doing. Finally, a few words on what we are not doing. We are not commenting on speculated transactions. This is our well-established principle. We are not doing transactions that do not create a clear and compelling superior return for our shareholders. This is true for M&A, this is true for spectrum acquisitions, this is true for fiber CapEx, and this is true for share buybacks as well. I think it is fair to say that this management team has a 15-year track record of disciplined and successful capital allocation. The capital allocation decision we announced today, the additional buyback facility, reflects exactly this discipline. Beyond this announcement today, there’s nothing to communicate. As mentioned, I will skip the next pages as most topics have been covered and move straight to our guidance increase on page 10.

T-Mobile US raised its 2026 free cash flow guidance by $0.2 billion at the midpoint on 23rd of July, and we are passing on this guidance today. As a result, our group free cash flow guidance increased to around $20 billion. We continue to guide for constant currency group EBITDA growth of around 6% to $47.5 billion in 2026. We reiterate our DT ex-US EBITDA guidance of $15.4 billion. Our guidance remains based on constant foreign exchange rates. As usual, we have a page in dependings in which we compare our guidance with the consensus adjusted for foreign exchange. Based on current exchange ratios, our DT ex-US EBITDA guidance would be in line with $15.5 billion consensus. With this, I hand it over to Christian.

Thanks, Tim, and hello from my side. As usual, let me quickly recap T-Mobile’s strong second quarter results. If we’re taking a look at the numbers, according to US GAAP, service revenue grew at close to 9% or 8.9% on a year-on-year basis, despite the fact that we had price increases that were rolling over. Obviously, the growth is supported by last year’s acquisition, especially UScellular. The core EBITDA grew at 11.7%, and that basically keeps T-Mobile well on track to achieve their ambitious financial targets. Account growth, as you know, grew at 277,000, and the ARPA was up 2% on an annual basis, and Tim talked about the lower churn on the postpaid phone. Let’s move over to Germany, which I think had a solid quarter. Total revenues grew at 3.7%. Obviously, that sequential acceleration is largely due to the World Cup-related non-service revenues.

This quarter’s adjusted EBITDA grew at 2.7%, which is very consistent with the previous quarters. For the next quarter, we expect the EBITDA to come a little bit below, whereas the fourth quarter will be above that 2.5%-2.7% range. The full-year guidance of EUR 11 billion EBITDA is fully intact. Mobile service revenues accelerate as well sequentially to 2.4%. We’re basically trading at the upper end of the guidance quarter of 2%-2.5%. Same holds true for fixed line service revenues. They also accelerated. You see, and we get into this later on, there’s a slight increase in broadband revenue growth, but it was also supported by some, I would call it lumpy IT project business. As you can see on the next page, broadband revenues is now basically accelerating. We’re at 1.6% in the first quarter, 1.9% in the second quarter.

We only had a small contribution from the back book price increase in the second quarter, this effect will increase in the upcoming quarters, therefore, we expect that the broadband revenue growth will further accelerate in the second half of this year. Wholesale service revenues obviously declined because the price increases from the previous years, especially from last year, were rolling over. We don’t anticipate any further deterioration. What we expect is that we basically cover volume losses largely through upselling and ARPA growth, either upselling copper or fiber infrastructure. Taking into account that we had solid growth in wholesale over the past two years, I think we’re well on track to meet our guidance, which we have given at the CMD, which is basically stable revenues. Let’s move over to the fixed KPIs, let me start with the broadband customer losses.

You see that we basically lost 20,000 customers this quarter. This is very much the same number which we had a year ago, it’s largely explainable through price-related churn. So far, that’s the good news about that churn, the actual churn is much lower than we anticipated it in the business case. We expect this to moderate out in the third quarter and to normalize in the fourth quarter, which will be a big driver also for the accelerated broadband revenue trends in the second half. We have many initiatives to improve our broadband performance. I think the most important one is fiber. You see that we’ve seen an 18% increase of fiber net adds on an annual basis and an 11% increase of our fiber penetration.

That is obviously not holding us back to continue to push on the renewed strategy, both in STUs and MDUs. We’re tracking well with an accelerated growth momentum here. Finally, on TV, we’re seeing steady growth in triple play and also in contracted OTT. Over the first half, we basically added 200,000 TV customers. On top, throughout the successful World Cup coverage, we welcomed roughly 1 million additional non-contracted OTT customers. It’s now up to the go-to-market teams to retain as many of those customers as possible. Next page, 18, we’re seeing the mobile KPIs. I think what you see, especially on the growth on volume or on data usage, that very much reflects our unlimited propositions, which we introduced a year ago. Moving over to Europe, Tim called it a clockwork. I would call it a Swiss clockwork. It’s really phenomenal what they’re providing.

The reported revenues grew at 1.5%, the organic service growth was 4.1%. Actually, you saw steady growth across mobile, across fixed, and across IT. The reported revenues were impacted by three factors. Obviously, we had a deconsolidation of Romania this year. We had a planned unwind of wholesale transit revenues, and that was somewhat offset by the very strong Hungarian currency, the forint. Organic EBITDA growth was accelerating to 4.1%. We are fully on track with our full year guidance, and the difference between organic and reported EBITDA is also related to the strong forint, which we are happy to see right now in this given year. On the commercial performance, you see a very steady performance across all four categories. Nothing to basically explain here. T-Systems, I think they posted a healthy year-on-year growth when it comes to revenue and EBITDA.

They are well on track to hitting their CMD targets. The order book was, due to phasing, a bit slower. We expect a much stronger second half and therefore also growth over the full year. Tim talked about this. T-Systems was able to secure two really important flagship contracts. One is Volkswagen, where we are going to build and operate Volkswagen’s global private cloud network. In April, we have been awarded, together with SAP, to develop the central citizen app. That shows that we are really well-positioned when it comes to digital sovereignty and that T-Systems is at the center of what is currently important on digitalization and sovereignty here. That concludes my operational review, and I move over to the reported financials.

What you see is we had some headwinds coming from the dollar, but still, you see that in the second quarter, EBITDA growth at 7.5%, adjusted earnings almost close to 13% this quarter. On the free cash flow, you see that free cash flow was up by 3% on a year-on-year basis, very much driven by the net cash flow from operations, which was burdened by the restructuring cash outs in the U.S. The adjusted net profit benefited especially from the adjusted EBITDA, which is a very strong performance, and you see that 11% here on a year-on-year basis. Next page. As always, you see our net debt development, left-hand side without leases. It increased by roughly EUR 5 billion on a quarter basis. This is largely driven by the DT and U.S. shareholder remuneration.

You see also on the leverage ratios that including leases, we are tracking well with 2.65 and without leases on 2.3. With that expanded share buyback program here on the DT side, we still will meet a leverage target, which will be below 2.75. I think that completes my review, and we will open it up for Q&A.

Hannes Wittig

Head of Investor Relations

0:21:56

Thank you very much, Tim. Thank you very much, Christian. We will now begin the Q&A session. If you would like to ask a question via WebEx, please use the raise hand function. Should you wish to withdraw your question, simply click the raise hand button again. If you are joining by phone, please press star three. To unmute your line, you press star 6. To withdraw your question, please press star 3 once again. I will announce your name when it is your turn to speak. As usual, we would appreciate if you could limit yourselves to two questions. Please also note that you will need to mute and unmute your line manually. With that, let’s begin. I think the first question is from Robert Grindle at Deutsche Bank. Robert?

Thank you. Good afternoon, great going on the clear view expressed about your own equity value today. Does buying back more of your own shares tilt your view on not selling into the T-Mobile US buyback? Is that an entirely separate decision dependent on the T-Mobile US share price? I think, Tim, you confirmed you will continue not selling even with the new buyback. Is that right? At least for this year. My second question is, there was some press recently that Cellnex had been in touch with GD Towers about a deal. Any comment on that? I think at the CMD you said that something could be done on towers. What is your latest thinking there? Presumably, you think your towers are worth more than public multiples. Thank you.

Robert, let me answer the first question. First, it is completely independent decisions. One has been taken care on the T-Mobile US board level and the other one here on the DT board level. I think the scheme is quite comparable. You see that T-Mobile is now trading at, let’s say, roughly $175. We think we should take advantage out of this, let’s say, volatility, therefore we expanded that share buyback program back in Q2 by up to EUR 3.6 billion. Same holds true for DT. I think if you take a look at the share price, in which it traded over the course of this year, we were trading from above EUR 34 to below EUR 24. Obviously, if you compare this against our, let’s say, long-term EPS multiple, we see there is opportunities to actually have an accretive share buyback and buying undervalued shares to a larger degree.

This is, as I said, independent decisions. Yes, I can confirm that we are not selling into the share buyback of T-Mobile US over the course of this year.

Christian, maybe to add one sentence here. By buying back our shares, we even buy into the profitability of the T-Mobile US stock, and we believe in the US stock, and that is why we have already built 55% of the stock, and it is ongoing, by not participating in their share buyback. We increase our value and we increase the value of the DT by how we are doing that. To be very clear, we looked on this one from an investment perspective. If you look to the free cash flow yield, which we have on our DT stock today for our shareholders, we are around 10%. This is better than any investment which we can do in these days. Secondly, we have shown 2% growth over the last five, six years, more than all our European peers.

We are trading with a discount to the multiple of our European peers, and therefore, even this is not reflected in our value. Another second reason to buy. The third one is the accretion for our EPS, which I mentioned already in my speech. Third argument. There’s so much argument that our company is undervalued and our performance going forward is even supporting this on a midterm and long-term perspective, that we took this very confident, clear message to significantly increase our share buyback program here in Europe by EUR 3 billion. Let me answer the second question. What is the last thinking on that one? To be honest, we are not commenting on any M&A speculations here. In principle, we are always open-minded for good opportunities here. There is nothing I can communicate. We are very happy with our assets of today.

Therefore, to be honest, this is something where you have to ask Cellnex or DigitalBridge. I cannot comment on this.

Hannes Wittig

Head of Investor Relations

0:26:32

Thank you, Robert. Thank you, Tim and Christian. Next we go to Carl Murdock-Smith at Citi, please.

Carl Murdock-Smith

Analyst

0:26:41

That’s great. Thanks, Hannes. Two questions from me. Firstly, on one of the reasons for the potential weakness in the share prices is concerns about satellite. You just talked about your investments to maintain market leadership. SpaceX earlier this week made comments that it’s not out of the question that at some point Starlink will deliver a majority of the world’s internet, talking about that on a 10-year timeframe. Also stating that it believes its service will be better than yours in the U.S. I’d love to hear your thoughts on those comments. Then secondly, just on the German EBITDA phasing, Christian, that you mentioned. Can you just expand a bit more on the reasons and potential quantum for the delta in the Q3, Q4 phasing on German EBITDA growth? Thank you.

By the way, the first, we take SpaceX ambitions very seriously. That’s the first one. Satellite connectivity will expand the market and improve coverage in places especially where terrestrial economics or geographical things are challenging. No question. T-Mobile, by the way, and Deutsche Telekom, we are already well-positioned to integrate our satellite capabilities, where they improve the customer proposition. We have a Gen One deal in the U.S., we have Gen Two deal for Europe, and we are ready to integrate that direct to device. Therefore, this is definitely something which, from our proposition, always best connected, is something which we consider. At the same time, high-capacity terrestrial networks, as we are providing them, they retain significant structural advantages in dense markets. No question. Capacity, indoor coverage, latency, simultaneous usage, and the cost per gigabyte are advantageous compared to satellite services.

The right answer for us is not to dismiss the technology. For us, it is to keep extending our own advantages against any other technology. That is the spectrum leadership, which is critical. Network density, which is, I think, the most important one. The distribution for our brand and the customer relationship, which we have built. Then the financial capacity on developing the networks in the way how we’re doing it. Therefore, for me, I can tell you there are a lot of announcements. To be honest, I’m a little bit irritated how the market is reacting on some of that one. Yesterday, we heard something about Femto. Guys, we had the Femto discussion years ago, remember that? We looked it up, whether this is an alternative, and we dismissed this opportunity for good reasons from a technology perspective.

Suddenly this is becoming a new kind of substitution risk. We don’t see that magnitude. We do not see any kind of significantly a disadvantage for our technologies, and we will do everything with all, let’s say, the generations who have built this infrastructure already, to keep this leadership. Therefore, the results are on our site. The customer experience as well. Therefore, some of these aspirations are very far-fetched and very conceptually. Nevertheless, it is not my money, it’s your money. We are doing our business and we are convinced that there is no substitution risk.

Okay, on the second question, Carl. First of all, this is related to cost phasing, nothing else. The revenue trends, as I said earlier on, we expect to be strong both on the mobile side, but also on the broadband side where we expect a acceleration of broadband revenue trends. This is a phasing effect, which you also had to a larger degree, to be very clear, in 2025. Remember, we had almost no EBITDA growth in 2025 in Q3, then it bumped up again. That will be not that dramatic this year, but we will trail below the 2.5% in Q3, and we will trail above 2.5% in Q4.

Hannes Wittig

Head of Investor Relations

0:31:06

Okay. Thank you, Christian. Next is Josh Mills at BNP Paribas, please.

Hi, guys. Thank you very much for taking the question. I wanted to come back to some of Tim’s opening remarks about the relationship between DT and T-Mobile US, without specifying any press reports. From the outside it looks like with your ownership stake, the ability you have to participate or not participate in the buyback, and the very strong working relationship between your European and U.S. teams, that the partnership works very well. The simple question is there anything we’re missing or any new opportunities that you’re looking at working on that the current corporate structure doesn’t allow you to do or frustrates? Would be the first question. Then on the second question, taking it down to Germany, we saw, as expected, slightly weakened net adds this quarter following the backbook price rise earlier in the year.

From your perspective, are we now through the peak churn of initial customers responding to that backbook price increase? How do you see the front book price competition in German broadband at the moment? I think there’s been a few more promotions across the board in that market. It’d be great to hear your thoughts there. Thank you.

Let me start with the second question on the net adds. As you said, rightfully so, we will expect that the churn-related net add losses will moderate in Q3 and will basically be normalized in Q4. Then there is no chance for customers to actually terminate their contracts. I think the good element about what we’re seeing right now is that the initial assumption of the marketing and sales teams were way more negative than what we see as actual churn. The churn is significantly lower than we anticipated it to be. The trend is actually in our favor, moderating in Q3 and normalizing in Q4. On frontbook price competition, I think everyone is a bit promotional. We are promotional. The other guys are promotional. Structurally, I don’t see any kind of significant change. I think everyone’s talking about value.

Let’s prove this pudding. I think we have shown that with our backbook price increase and also with the frontbook price increase last year, that we’re focusing on value. I think that’s the only way to kind of getting into growth in the broadband market because we don’t have hardly any volume growth in that market.

Look, with regard to your question on the relationship. Look, we have a clear ownership in the U.S. We have a financial consolidation and control. We have a governance which is well established with, let’s say, the amount of board seats we are having and the veto rights which we have as a shareholder. On the operational management, on the day-to-day decisions, being it pricing, customer propositions, network execution, marketing, all these kind of things, I can tell you it is anyhow our philosophy in the group to keep that independent in the countries. This is the empowerment and to be honest, one of the reasons why Deutsche Telekom is more successful than other telcos was that we were having this right balance between central and local found for the reason.

When it comes to strategic alignment, look, we are always acting as two groups, and two groups are always acting as two groups. That means whenever, for instance, we are developing a software, like the One App, we have a third-party transaction. Look, yes, we are collaborating, but it is coming with complexity. There’s no question. We have to go through the board, we have to go into the audit committee with each of the transactions, with each of the joint activities, because we have to file third-party transactions. Second, in some areas it’s not easy. I can tell you the Apple account, for instance, is dealt not jointly. It is dealt from two companies independently. In some areas we are not able to leverage our procurement activities these days. These are minor areas.

When it comes to the big strategic things, we can really work together in a good way. Sometimes it’s a bit complicated due to the two entities which we always have to consider. These are the limitations which we have. I think we are on a good track to get all our interest and all our strategic ambitions realized in this structure which we have and the trust we have built between the teams.

Hannes Wittig

Head of Investor Relations

0:35:58

Excellent. Surely T-Mobile’s share price also over the value creation in the U.S., the fact that it’s the most valuable telco in the world, I think bears witness to the success of our situation. Next up is Akhil Dattani at JPMorgan.

Hi. Good afternoon. Thanks for taking the questions. The first is just on data centers. Tim, you’ve discussed in the past your views around the AI Gigafactory project from Europe and some of your concerns with some of the elements of that. Now that we’re getting the process of now submitting proposals, could you update us as to whether those have been addressed, where you stand on that? Also more broadly on data centers, you talked a lot about your off-balance sheet data center assets, some of the opportunities there. Just any further thoughts in terms of how you can drive and monetize those pieces going forward? That’d be the first question. The second one is just going back to, I guess, some of the broader points you raised at the beginning of the call around the buybacks and overhangs.

Obviously, it’s a strong signal to the market that you believe your stock’s undervalued. I guess one of the tricky elements to the debate is we’re debating something very long duration that’s very hard to quantify. You gave us some helpful color around why you think satellite risks are misunderstood and maybe overplayed. As you think about business planning going forward, how do you think about routes to growing and protecting your moat more strongly? At the same point, what sort of things can you do to disrupt yourself as you think about the opportunity it creates? Not just what are the defensive tools, but also offensively, what can you do here to create more value?

Wow. Good questions. Let me think on the answers. The first one, talking about the data centers. Our ambition is to grow our data center business in line with the demand which we see for sovereign, secure, and AI-ready infrastructure, which we clearly see here in Europe. I can tell you, if you look to our industrial AI cloud, which we have built with NVIDIA in Munich, the 10,000 GPUs, the Blackwell ones, B200 are sold out. I could have sold them 10 times. We were maybe too fast on giving them away. We should have, even from a pricing, be more aggressive. Anyway, we are where we are. We learned on this one, so this is something. We have more challenges, by the way, with the RTX chipsets to sell them. Nevertheless, highly and good utilization of our industrial AI cloud in Munich.

We are thinking about expanding this. There’s a capacity of another 20,000 GPUs. I was in the Valley with Ferri recently, and we discussed how to get the right amount of chipsets there to fulfill that. On top of that, we have seen the documents for the AI gigafactories tender, where we are now assessing our participation. To be honest, I was very critical about the document. At a glance, I can tell you there were significant improvements in this from a pricing perspective. It is not anymore one price. It is now market related. It’s not a minimum commitment for a gigafactory. It is going in steps, being a smaller or bigger one. I think it’s around 150 megawatt they are talking about. I’ve seen that, but to be honest, it’s a little bit too early. We have just started looking into this one.

It’s one week old, this document now. We haven’t taken the decision. The principle of what we have laid out, doing this with a financial partner going forward, splitting the real estate and the infrastructure and the cloud. The idea of saying we do not want to be a host for frontier models alone. We want to have an added value with a cloud service sitting on top of that with an orchestration layer, which is providing the customer needs. The idea of building a full stack, which is sovereign with local basis. Even the discussion about maybe some of the big frontiers models who want to expand into a sovereign ecosystem. What does that mean from a distillation perspective, from a kill switch perspective, from a weights perspective? These are discussions which are ongoing with the frontier models.

To be honest, I cannot give you a final answer on that one. I hope that the signal of today is that we are not going into any kind of stupid tenders or stupid index if we are not be able to get decent financial returns. I’m always surprised that shareholders, after following me now for almost 20 years in the role of the CFO and the CEO, that you do not understand how I’m thinking. I’m not tolerating that any business is not making its profits. I’m not tolerating that any business not making its return on capital employed. This is true for the historical business. It’s true for our connectivity business. It’s true for every segment. It will be true for T-Systems. I can tell you it will be even true for the gigafactories or for data center capabilities.

We are not going into any kind of stupid politically pushed transactions. We will only go into this transaction when we make decent returns on that.

Let me try to start with answering that second question, which is a very broad one, Akhil. First of all, let me rest assure you that decision that we’re expanding the share buyback was not an in-year decision. It also reflected what is needed in the future, in the upcoming years, and whether we can afford this, yes or no, we will not compromise on any investment plans which we had. For example, on U.S. spectrum auctions, which are important, whether it’s be in the upper C-band or the 2.7 gigahertz spectrum, which for me is one of the offense plays I would allude to. Secondly, what you’re seeing in the U.S. is they’re branching out from the core business. We introduced, I think, businesses in the ad space. They were also talking about entering the financial services market.

That is kind of adding new additional growth legs. I think on the European side, we are using AI currently very broadly to drive efficiencies and to be less dependent on people to run this organization. We’re also, I think in Europe, we’re making some progress on global scale. For example, we will have one transport network across the European countries. We have basically finalized a big tender in order to secure memory chip supply across all European countries, which came with a significant cost effect. We have now moved from Customer-centric measures in order to measure the performance of a network towards technology-centric measures towards customer-centric measures. We started off with that in the mobile space. We will expand this to TV and broadband.

I think these are the lines where we’re experimenting and where we’re trying to figure out whether it’s either defensive move, if it’s efficiency, or whether it’s additional growth opportunity for us, be it in ads or be it in financial services.

Look, Akhil, one last sentence. Even reflecting, you cannot look on a share buyback isolated from the needs for the operations. We have a need to invest in spectrum. We have a need to sustain our competitiveness on the fiber and the broadband business. We have a need to always be leading on the mobile networks. We have a need to look for future investments, maybe even in the area of data center capacities. We have the need to look on our shares. These are all investment needs, and we have to do, and we look to the mix. This volatility and this discrepancy between the inner value and the growth prospects of this group forced us this time to take a decisive action to buy back this stock. Otherwise, this is a signal which we’re doing.

That doesn’t mean that we are now going away from our operations or from our business. The opposite is the case. The luxury which we have compared to all the other telcos is that we have the money. We have an A-minus rating. We have a very, let’s say, solid financial reserve in our group, and that is why we took this decision right now. It is not that we are cannibalizing or that we are sacrificing something from our operational perspective. EUR 18 billion investment this year are confirmed.

Hannes Wittig

Head of Investor Relations

0:45:22

Great. Thanks, everyone. Next up is Paul Sidney at Berenberg, please.

Thank you very much, Hannes. Good afternoon, everyone. Just two questions from me, please. The German price increases you put through in H1 seem to have landed really well. You’ve got the value over volume strategy. I was just wondering, does this give DT more confidence to potentially be even bolder in terms of back book price increases for both broadband and mobile? If we take a step back, everyone’s getting a gold-plated service from you for pretty much EUR 1 a day, which feels pretty ridiculous in my opinion, and I’m sure you probably share the same view. Just getting your thoughts on that. Just going back to SpaceX, I know we touched on it earlier, but I don’t want to get into any details.

Given the more disclosure we’ve had post the IPO and the Q2 results earlier in the week, has anything surprised you, either positively or negatively, on the increased information we’ve had from them around the industry, U.S., Europe? Just be really interesting to get your thoughts. Thank you.

Okay. Look, on the first thing, we have increased our price by EUR 2 per month on the customer base. Affected were something like 5 million or 4.9 million customers out of 15. Almost a third. We were expecting a little bit of churn, which we have seen this quarter. To be honest, we are very encouraged by the reaction of the market and the customer base. It shows that this is possible. Kudos to Rodrigo. Kudos to the German team, who were brave enough to move in this right direction here, because it cannot be that we are constantly investing more into the broadband build-out, into fiber, having price increases and the like, but not being able to monetize this over time. Therefore, I think it is a necessity not only for Deutsche Telekom, it’s a necessity for the whole industry.

Therefore, yes, I feel encouraged from this angle. It would be crazy if not. The second thing is SpaceX. Any surprises? Look, there are a lot of surprises in this world. “Today we solve the indoor coverage,” and then I have a sleepless night saying, “How is that possible with a satellite?” Then I learn something which I would say challenges from a technical perspective. Then we learn femtocells is the solution for a mesh network. Okay. To be honest, there are a lot of buzzwords which are flying around these days. Therefore, as I said, it’s a great complementary service. I think the most attractive one is I think there is a business for the fiber, for the broadband services. This is in rural areas where really, let’s say, bad coverage is given. This is a kind of technology which can work.

I can tell you the best, it’s not as good as fiber. This is always a superior technology. Therefore, yes, I see that as one. I think the capacity of overbuild and the amount of satellites is something which I’m surprised about. What I’m more surprised about is not about SpaceX, it’s about the catch-up of LEO and the developments which we see from the Amazon side or even the ambitions from AST. Different technologies, but even very decent capacity they can build. I can tell you there will be not only one satellite player, there will be even a few which we can include into our offerings going forward.

Brilliant. Thank you. Please can I just have a very quick follow-up? Have you ever announced the uplift in ARPU when a customer moves to fiber in Germany? Apologies if I’ve missed it.

Okay. Very clear. Thank you. I appreciate the comments. Thank you.

Hannes Wittig

Head of Investor Relations