Deutsche Telekom : "Let's take a more optimistic approach to digitization"

• Deutsche Telekom CEO Tim Höttges calls for digital responsibility
• Network build-out continues to be the basis for all of Deutsche Telekom's activities
• Criticism of competitors: 'Moaning won't build a network. Better to invest than criticize.'
• Dividend to rise 10 percent to 55 eurocents per share

A company on course for growth paving the way for digitization. This was how Deutsche Telekom presented itself at the shareholders' meeting in Cologne's Lanxess Arena.

'Digitization is the greatest gift because it is the basis for prosperity for coming generations. It promises new technologies that make people's lives easier. It is the driving force of a new industrial revolution,' said Chairman Tim Höttges in his speech to shareholders. 'So let's try to be more optimistic in our dealings with digitization.'

Tim Höttges presented hands-on digitization right at the beginning of his speech. At the side of the shareholders' meeting stage, he demonstrated in a special living room scenario the possibilities offered by the connected home, such as management of electrical devices using the smart home solutions from Qivicon. The new Entertain IP TV platform also played an important role.
'But while we see it as an opportunity, others are troubled by it,' conceded Höttges. 'We take these concerns seriously. At the beginning of the year we launched an initiative to induce the discussion on digital responsibility. Because we, too, are learning. We do not have all the answers. But we know the experts who work with this day in, day out. We invite people to participate in a public, open dialog.'

Höttges summed up the last financial year: '2015 was a successful year for Deutsche Telekom. And we deliver on our promises.' According to the proposal put forward by the Board of Management and the Supervisory Board, the dividend is to rise 10 percent to 55 eurocents per share. As in the three previous years, shareholders can opt to take their dividend either in cash or in the form of shares. Last year, the second option was chosen for 49 percent of shares. 'It meant that we paid out around EUR 1.1 billion less in dividends. This helped us on our path to growth,' Höttges explained.

As announced at Capital Markets Day 2015, the dividend will grow in line with the trend in free cash flow. This rose by 9.8 percent to 4.5 billion euros in 2015. Other KPIs also document the growth course in the successful 2015 financial year. Group revenue increased by 10.5 percent to 62.2 billion euros, adjusted EBITDA was up 13.3 percent to 19.9 billion euros, and adjusted net profit climbed by almost 70 percent compared with 2014 to 4.1 billion euros.

The Chief Executive Officer outlined three areas which will be responsible for Deutsche Telekom's advance in 2016:

• Shareholding structure. Tim Höttges named the UK as an example where the company created value for its shareholders. There, a 50-percent holding in mobile-only joint venture EE was transformed into 12 percent in BT, clear number one in the telecommunications market in Europe's second-largest economy.
• Customer service. Examples of further improvements include a personal adviser for customers changing their provider or residence, and a new app that deals with all issues relating to service.
• Network build-out. 'It is, and will continue to be, the basis for everything we do. It has top priority for me,' Höttges said.

The Group invested 10.8 billion euros last year, above all in networks, 13.6 percent more than in 2014. 'Deutsche Telekom has delivered the best network for many years. Our core product is timeless. But we go on re-inventing it. And we plan the network in such a way that it is the answer to the digital future,' Höttges said. 'In 2010, my predecessor René Obermann was the first person in Germany to refer to a gigabit society. Now everyone is talking about it. But Deutsche Telekom was the only company to act on these words in the past six years.'

Höttges explained that a powerful broadband infrastructure is crucial for the home market: 'I will put it bluntly: Germany needs high-speed networks. And now rather than later.'

The CEO also spoke forthrightly about competition in the broadband market: 'Our competitors do nothing but moan and groan. Sometimes they complain that the prices they pay for our network are too high. Sometimes they say that we have the wrong technology. Then build-out is too slow, they claim. But as soon as we expand it, these critics are only too happy to use our network. They market our products under their name. It would be better for Germany if others also contributed to expansion. Moaning won't build a network. Better to invest than criticize. Then we would have real infrastructure competition.'

Höttges made it plain that the network of the future will be based on optical fiber but will be more than just high bandwidth. Its quality also depends on reliability, a seamless transition between mobile and fixed network, and fast response times. This will be vital to make applications such as the connected car possible.

'This network of the future has a name: 5G. People and billions of machines and sensors will communicate over it. This is the digital future. 5G is our answer. We will be launching it starting in 2020. But we are already making the preparations today.'

This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward-looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, depreciation and amortization, cash flows, and personnel-related measures. They should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. Among the factors that might influence our ability to achieve our objectives are the progress of our staff restructuring initiatives and other cost-saving measures, and the impact of other significant strategic, labor, or business initiatives, including acquisitions, dispositions, business combinations, and our network upgrade and build-out initiatives. In addition, stronger than expected competition, technological change, legal proceedings, and regulatory developments, among other factors, may have a material adverse effect on our costs and revenue development. Further, the economic downturn in our markets, and changes in interest and currency exchange rates, may also have an impact on our business development and the availability of financing on favorable conditions. Changes to our expectations concerning future cash flows may lead to impairment write downs of assets carried at historical cost, which may materially affect our results at the Group and operating segment levels. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, our actual performance may materially differ from the performance expressed or implied by forward-looking statements. We can offer no assurance that our estimates or expectations will be achieved. Without prejudice to existing obligations under capital market law, we do not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise.

In addition to figures prepared in accordance with IFRS, Deutsche Telekom also presents non-GAAP financial performance measures, including, among others, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted net profit, free cash flow, gross debt, and net debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.

About Deutsche Telekom
Deutsche Telekom is one of the world's leading integrated telecommunications companies with more than 156 million mobile customers, 29 million fixed-network lines, and around 18 million broadband lines (as of December 31, 2015). The Group provides fixed-network/broadband, mobile communications, Internet, and Internet-based TV products and services for consumers, and ICT solutions for business customers and corporate customers. Deutsche Telekom is present in more than 50 countries and has around 225,200 employees worldwide. The Group generated revenues of EUR 69.2 billion in the 2015 financial year - around 64 percent of it outside Germany.