Deutsche Telekom AG

Overview Key strengths Key risks Leading position in fixed and mobile segments 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. DT has exceeded the upper limit of its 2.25x-2.75x net debt to EBITDA corridor since the acquisition of Sprint in 2020. However we estimate the ratio remains below 3.5x (S&P Global Ratings adjusted) since end-2022 and will return to the corridor by the end of 2024. Rational competition in the domestic mobile market, with three established and an emerging fourth mobile network operator, and rational pricing and predictable conditions in fixed broadband. Pressure on free cash flow generation in Europe, reflecting likely high capital expenditure (capex)

...The business environment in Deutsche Telekom AG's (DT) largest markets is supportive. The company has a strong, well-established incumbent position within Germany, which contributes about a quarter of the group's reported EBITDA. In the fixed-line broadband market, we expect DT to maintain its dominant position and to be able to expand average revenue per user (ARPU) over time supported by its ongoing FTTH build-out. In the mobile market, which we view as rational, the only gradual ramping-up of a fourth player (1&1) has not created market turmoil. Furthermore, in the U.S., DT has a solid position through its controlled, fully consolidated subsidiary TMUS, which contributes around 65% of the group's reported EBITDA. TMUS benefits from its superior spectrum holding, first-mover advantage in 5G, and synergies from the merger with Sprint. Synergies and fewer one-off costs at TMUS will drive strong improvement in DT's S&P Global Ratings-adjusted EBITDA margin. We expect DT's adjusted EBITDA...

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