Deutsche Telekom AG, Europe’s largest telecommunications carrier, announced plans for a €2 billion ($2.2 billion) share buyback in 2025, aiming to further enhance shareholder returns while accelerating its internal efficiency through artificial intelligence (AI). The announcement came ahead of the company’s highly anticipated capital markets day and signals a continuation of its robust performance, which has outpaced many of its European peers in recent years.
Alongside the share buyback, Deutsche Telekom also revealed a proposed dividend increase to 90 cents per share for the 2024 financial year, marking a notable rise from the 77 cents per share dividend in the previous year. This proposed dividend is a clear reflection of the company’s financial strength and confidence in sustained growth, buoyed by strong results from its US operations, particularly T-Mobile US Inc., where Deutsche Telekom holds a majority stake.
The 2025 buyback announcement follows a similar program launched this year, in which the company repurchased €2 billion worth of shares, signaling a commitment to continue rewarding its investors amid sustained financial flexibility.
Deutsche Telekom’s performance in 2024 has been robust, with its stock price climbing approximately 25% year-to-date, outpacing most European competitors. This growth is primarily driven by the success of its US operations, notably T-Mobile US, which has seen significant subscriber growth. The stake in T-Mobile US has provided Deutsche Telekom with substantial cash flow, enabling the company to pursue strategic investments and enhance shareholder returns.
“Deutsche Telekom is outperforming its European peers, buoyed by T-Mobile’s strong subscriber growth and a solid financial position,” said James Ratzer, an analyst at New Street Research, in a note on Thursday. “The company’s financial outlook suggests that it will continue to have the flexibility to either increase its stake in T-Mobile US or return even more cash to shareholders.”
Ratzer also noted that while Deutsche Telekom is focused on shareholder returns and its US expansion, the company is leaving itself open to larger value-accretive deals in the US, should such opportunities arise. This flexibility in strategy will allow the company to respond swiftly to market developments and opportunities, further strengthening its competitive position globally.
Deutsche Telekom’s shares rose by 1.3% on Thursday, trading at €27.09, as the market responded positively to the buyback and dividend increase announcement. The stock has seen significant gains this year, a clear testament to investor confidence in the company’s ongoing strategic initiatives and growth potential.
In addition to its financial maneuvers, Deutsche Telekom plans to increasingly rely on artificial intelligence (AI) to boost operational efficiency over the next three years. CEO Tim Höttges emphasized that AI will play a key role in transforming customer service and internal processes, contributing to better service delivery and cost optimization.
One of the primary areas of focus for Deutsche Telekom’s AI strategy is the development of self-service applications and AI-supported customer service tools. These tools, such as AI-powered messenger services, will aim to streamline customer interactions, reduce wait times, and enhance user experiences. Deutsche Telekom is already utilizing Meta Platforms Inc.’s Llama generative AI, but Höttges stressed that the company remains “agnostic” in choosing AI models, allowing it to select the best technologies available in the market.
“We believe AI is the next step in improving our services and internal processes,” Höttges said during a press conference on Thursday. “With AI, we aim to enhance customer experiences, reduce costs, and ultimately drive growth.”
Deutsche Telekom is also constructing at least three data centers to support its AI-driven ambitions. These centers will initially require 300 megawatts of power, with the potential to expand up to one gigabyte. However, the company faces challenges in securing the necessary real estate, energy, and water supplies for these ambitious projects.
“It’s not easy to compete with us because now we also have liquidity,” Höttges said, reflecting on the company’s current financial position. “We no longer have to worry about how to secure a majority stake in the US or where to find funds for investment. We’re in a strong position to make strategic decisions.”
Deutsche Telekom’s future looks promising, with the company projecting annual service revenue growth of around 4% through 2027. This growth will be driven by both organic expansion and strategic investments, particularly in the US, where T-Mobile continues to be a critical growth driver.
In 2023, Deutsche Telekom’s organic service revenues grew by 3.6%, a healthy indicator of sustained demand for its services across various markets. The company expects this momentum to continue in the coming years, with adjusted earnings before interest, taxes, depreciation, amortization, and after leases (Ebitdaal) forecast to grow by an average of 4% to 6% per year through 2027.
This outlook aligns with the company’s previous forecasts for 2024, where adjusted Ebitdaal growth is expected to reach approximately 6%, reinforcing Deutsche Telekom’s strong financial foundation and capacity for continued expansion.
Deutsche Telekom’s strategic emphasis on T-Mobile US continues to pay dividends, both literally and figuratively. With the US market being more dynamic and lucrative than the European market, T-Mobile’s growth has provided Deutsche Telekom with a significant financial buffer, enabling it to invest in new technologies, repurchase shares, and increase dividends.
T-Mobile’s subscriber growth, particularly in the competitive 5G space, has solidified its position as one of the leading wireless carriers in the US. Deutsche Telekom has leveraged this growth to expand its market share and enhance its influence in one of the world’s most important telecommunications markets.
The potential for Deutsche Telekom to increase its stake in T-Mobile US remains a topic of interest for investors and analysts alike. The company currently holds a majority stake, but further increasing its shareholding could provide even greater long-term financial returns, especially as T-Mobile continues to capture market share from its competitors.
Despite its strong performance, Deutsche Telekom faces several challenges as it continues to expand. The company’s ongoing AI integration efforts will require significant investments in infrastructure, including data centers and advanced technologies. Furthermore, the real estate, energy, and water requirements for these data centers could pose logistical and financial hurdles.
In addition to infrastructure challenges, Deutsche Telekom will need to navigate an increasingly competitive global telecommunications landscape. Competitors in both Europe and the US are investing heavily in new technologies, such as 5G and AI, to capture market share and improve operational efficiency. Deutsche Telekom’s ability to stay ahead of these trends will be critical to its continued success.
Moreover, the potential for larger mergers or acquisitions in the US market adds an element of uncertainty to the company’s long-term strategy. While Deutsche Telekom has the financial flexibility to pursue such deals, the timing and scale of any future transactions could have a significant impact on the company’s growth trajectory.
