Deutsche Telekom Upgraded To 'BBB+/A-2' On Solid Deleveraging Trajectory; Outlook Stable

Deutsche Telekom AG (DT) outperformed its 2022 guidance, and with the first-quarter 2023 results also raised its EBITDA guidance for the year. We expect the S&P Global Ratings-adjusted EBITDA margin to expand further as merger costs related to Sprint will decline, leading to a gradual improvement in the margin toward 40% by 2024, versus 34.7% in 2022. In addition, we anticipate a slowdown in capex at TMUS, which, in combination with an expanding EBITDA margin, leads us to expect that the company's adjusted FOCF will approach €20 billion annually in 2023-2024, compared with €12 billion in 2022. Furthermore, we expect leverage to gradually decline toward an adjusted leverage of 3.0x by year-end 2024, from 3.5x in 2022, based on DT's

...May 19, 2023 - Deutsche Telekom AG (DT) outperformed its 2022 guidance, and with the first-quarter 2023 results also raised its EBITDA guidance for the year. We expect the S&P Global Ratings-adjusted EBITDA margin to expand further as merger costs related to Sprint will decline, leading to a gradual improvement in the margin toward 40% by 2024, versus 34.7% in 2022. - In addition, we anticipate a slowdown in capex at TMUS, which, in combination with an expanding EBITDA margin, leads us to expect that the company's adjusted FOCF will approach 20 billion annually in 2023-2024, compared with 12 billion in 2022. - Furthermore, we expect leverage to gradually decline toward an adjusted leverage of 3.0x by year-end 2024, from 3.5x in 2022, based on DT's financial policy framework and further deleveraging priority, as well as its strong financial flexibility, including the remaining value of its 49% stake in GD Towers. - We therefore raised our long-term issuer and issue credit ratings on DT and...

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