Deutsche Telekom Raises Operating Profit and Slightly Increases Free Cash Flow Forecast

Analysts see a solid foundation

The news was received cautiously on the stock market. Analysts pointed out that the forecast increase was only modest. Nevertheless, observers see the group as fundamentally well positioned. The starting position of a historically low valuation combined with a solid balance sheet without excessive debt forms an excellent starting position for the stock, wrote DZ Bank analyst Karsten Oblinger.

Höttges also reaffirmed the chosen course, according to which the group continues to drive the expansion of fiber optic and 5G networks in Germany. Telekom is investing billions in digital infrastructure and aims to offer nationwide fast connections in the medium term. At the same time, the management warned of rising costs due to energy and regulation.

The business figures at a glance: Group revenue rose compared to the same quarter of the previous year, driven by continued strong mobile business in the United States and stable business in Germany. Adjusted operating profit before depreciation and leasing (EBITDA AL) also improved. Free cash flow for the full year is now expected to be at the upper end of the previous range.

Outlook: stable corridor, high investments

For the current year, management continues to expect group revenue of around 124 billion euros and adjusted EBITDA AL of between 51 and 52 billion euros. These targets had already been issued by the group at the beginning of the year. They are slightly above the expectations of most analysts, without the group having to shift the corridor upward.

The debate about network strategy in Germany continues meanwhile. Critics complain that the group charges regionally limited high prices for fiber optic connections. Telekom points to a high level of investment activity compared to the rest of Europe and emphasizes that expansion must remain economically viable. The Federal Network Agency is monitoring market developments.

Dividend and competitive environment

For shareholders, dividend policy remains a central issue. Telekom has paid a growing dividend for years and most recently announced that it would maintain the level even in difficult market phases. The group is a heavyweight in the German leading index DAX, thanks to its stake in T-Mobile US and its position as the largest European telecommunications group.

Overall, the group is satisfied with the course of the quarter. In the coming weeks, the group's leadership wants to inform investors about medium-term targets at a series of conferences. The question of how the company is positioning itself in competition with providers such as Vodafone and 1&1 is also likely to play a role. The stock was slightly in the red on the day the figures were released, although analysts rated the outlook as predominantly solid.