Deutsche Telekom Capital Markets Day (1): highlights overall

From Deutsche Telekom's Capital Markets Day.

• Dividend to be lowered.
• Capex to be stepped up, focus on LTE and FTTC.
• Focus on cloud, partnerships with Microsoft (Office 365) and Box (Box Business).
• Growth markets: B2B/ICT, mobile data, TV; will go to 40-45% of rev by 2015 (2010: 24%).
• Revenues to return to growth by 2014 (Germany stabilising, USA only from 2015).
• Dividend policy to be reviewed for 2015, will be a mixture/choice of cash dividend and share-based dividend.
• Net debt/EBITDA 2.0-2.5, equity ratio 25-35%.
• Germany: "High-speed Internet access on a scale never seen before", LTE (150 Mb/s, coverage 85% by 2016), FTTC (coverage 65% by 2016 or 80% incl public co-funding; with vectoring 100 Mb/s; capex 2013-2020 EUR 6bn), hybrid LTE + vectoring (hybrid-box, 200/90 Mb/s), EBITDA-margin to 40%, market shares 35% in mobile service rev and 43% in BB lines.
• USA: LTE (2x20 MHz; capex $4bn; coverage 225m pops YE 2013; MVNO platform), agreement with Apple (from 2013). MVNOs 12Q3: 3.9m subs (+11%), rev $126m (+15%). B2B 12Q3: 6.3m subs (+5%), target 2013 growth 8-10%.
• MetroPCS: subs to be migrated by 15H2, CDMA to be recommissioned, spectrum to be re-farmed for LTE, DAS network (6k nodes) to be upgraded to HSPA+ and LTE, addressable pops to 280m.
• USA targets mid-term (5 yr): rev CAGR 3-5%, EBITDA CAGR 7-10%, FCF CAGR 15-20%, margin (of service rev) 34-36%. Sources of growth: contract (flat growth), no-contract (the 'un-carrier'; 80-90%), geographic expansion of MetroPCS brand (10-20%).
• Considers IPO for EE, strategic alternatives for Scout group, more network sharing deals.
• IT savings EUR 1bn per annum by 2015; One DT Europe program (centralizing shared tasks) to leverage economies of scale in Europe.

Assuming inclusion of MetroPCS from 1/1/2013:

                  2012      2013      2014   2015   2016

SERV. REV USA            20.8-21.0

EBITDA    GROUP     18      18.4        up
          USA              5.8-6.0

MARGIN    GROUP                                40
          USA               27-29

EPS                                          0.80

DPS               0.70      0.50      0.50

CAPEX GERMANY                3.4       4.1    4.3    4.5

      USA                 $4.7-4.8    $3.0   $3.1

      GROUP        8.3       9.8              9.5

FCF                  6         5                6