Euro am Sonntag: Deutsche Telekom shares: the next phase | News


Sven Parplies, Euro on Sunday

Dand Deutsche Telekom is primarily an American company. Thanks to the dynamically developing subsidiary T-Mobile US, the inhabitants of the Rhineland generate almost two-thirds of their sales in North America. The share is likely to continue to grow as important changes await in the DAX group.

The next step is expected to be the partial sale of the European radio tower business. According to the Bonn Telekom headquarters, the search for decisions is still ongoing in 2022. Potential buyers include the European market leader Cellnex, American Towers, a subsidiary of Vodafone Vantage Towers and financial investors. Analysts estimate the value of the radio tower business at up to 18 billion euros. If a little more or less than 50 percent were sold, about nine billion would go to the coffers. There are three options to choose from: debt reduction, buyback of treasury shares and purchase of additional shares in an American subsidiary. Telekom currently has 48.4 percent. T-Mobile US shares. The management board wants to increase the stake to over 50%. While T-Mobile US operates in a very competitive market, investment costs should decline soon. Analyst consensus predicts that free cash flow will increase to over US $ 18 billion by 2025 from US $ 7.4 billion this year. The more shares the parent company owns, the more Rhineland shareholders will benefit.

Business resistant to crisis

The geopolitical crisis has little impact on the day-to-day operations of Deutsche Telekom. Energy costs are less than one and a half percent of sales. Personnel costs are more important. With the new collective agreement, at least in Germany, security is planned for two years.

Deutsche Telekom adjusted operating profit rose 6.8 percent to EUR 9.9 billion in the first quarter, exceeding analysts’ expectations. The Management Board raised its forecast for the current year, albeit only slightly, from approx. EUR 36.5 billion of adjusted operating profit to over EUR 36.6 billion. The decisive factor for the increase is better development in the US. Analysts assume that Telekom may add a little more – the consensus is 38.85 billion.

Analysts expect the dividend to increase from 64 to 68 cents a share in the coming year. While dividends remain the strongest argument in favor of a T-share in the long term, analysts also see significant upside potential. If you subtract the market value of the US bundle, the rest of Europe is cheap to buy. According to the Bloomberg database, the average target price for all professionals is just under € 23. Even if it proves too optimistic, it remains a company with a defensive business model and equities with a dividend yield of more than 3.5%.

Stability: As a defensive investment with a decent dividend yield, Telekom shares remain a good investment.

Conflict of Interest Notice:The majority owner of the sole shareholder of Finanzen Verlag GmbH, Mr. Bernd Frtsch, took direct and indirect positions in the following financial instruments mentioned in the publication or related derivative instruments that may benefit from price changes resulting from the publication: Deutsche Telekom.

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