Deutsche Telekom AG

Overview Key strengths Key risks Leading incumbent position in fixed and mobile in the German telecom market, and a controlling stake in the No.2 U.S. mobile operator T-Mobile U.S. (TMUS) with strong spectrum holdings. Deutsche Telekom (DT) likely to exceed the upper limit of its 2.25x-2.75x net debt to EBITDA comfort zone through 2023, although S&P Global Ratings-adjusted leverage should drop to less than 3.5x already in by year-end 2023, and further improve thereafter. Rational competition in the mobile domestic market, with three established and an emerging fourth mobile network operator, and rational pricing and predictable conditions in fixed broadband. Capital expenditure (capex) likely to remain high at about 16% of sales, excluding spectrum on average over 2022-2024, and at

...The business environment in DT's largest markets is supportive. DT has a strong, well-established incumbent position within Germany, which contributes around a quarter of the group's reported EBITDA. In the fixed-line broadband market, DT has been successful in driving up revenue per consumer, because it offered faster broadband speeds, thanks in particular to its super- vectoring technology, while the lack of a broader FTTH footprint hasn't proven problematic so far. In the mobile market, the only gradual ramping-up of a fourth player (1&1) has not created market turmoil. In the U.S., DT has a solid position through its controlled, fully consolidated subsidiary TMUS, which contributes around 60% of the group's reported EBITDA. TMUS benefits from its superior spectrum holding, first-mover advantage in 5G and cost synergies from the merger with Sprint. DT's credit metrics will likely reach upside triggers in full-year 2023, and further strengthen thereafter. The group generates robust free...

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