Expectations for the Group

Expectations up to 2022. We expect profitable growth to continue over the next two years. This will provide a sound basis for achieving our financial ambitions – as communicated at our 2018 Capital Markets Day and taking into account the implications of the business combination of T‑Mobile US and Sprint.

We expect our financial performance indicators to develop as follows in 2021 and 2022:

• Revenue should increase slightly year-on-year in 2021 and remain stable in 2022. The forecast for 2021 is based on a slight increase in revenue in the Germany, United States, and Group Development operating segments. Revenue is expected to remain stable in the Europe operating segment and to decline slightly in the Systems Solutions operating segment in 2021. Then in 2022, we expect revenue to increase slightly in the Germany operating segment and to increase in Group Development. In our other operating segments, revenue is expected to remain stable in 2022. Service revenue is projected to increase year-on-year in both 2021 and 2022.
• Adjusted EBITDA AL is expected to come in at around EUR 37.0 billion in 2021 and to rise in 2022. In the next two years, adjusted EBITDA AL will be negatively affected by the gradual exit from the business model of terminal equipment leases in the United States, with revenues from terminal equipment leases being offset primarily by the depreciation of the capitalized terminal devices on the expenses side. Terminal equipment leases were a major pillar, in particular, at Sprint. In its place, marketing activities are set to shift increasingly toward terminal equipment sold under installment plans.
• We are forecasting a slight decrease for EBIT in 2021. The partial reversal of impairment losses on spectrum licenses at T‑Mobile US had a strong positive effect in the reporting year. We expect EBIT to rise sharply again in 2022. The expiry of the amortization of UMTS licenses in the Germany operating segment will contribute to the positive trend.
• Return on capital employed (ROCE) is expected to decline in 2021 and return to growth in 2022. Hence, we expect to achieve our target for ROCE to be higher than the expected weighted average cost of capital (WACC) again in 2022, following a briefly increased burden in 2021 from the integration costs arising from the business combination of T‑Mobile US and Sprint.
• Our investments – measured in terms of cash capex (before spectrum investment) – are expected to amount to around EUR 18.4 billion in 2021 and to remain stable in 2022. We want to continue investing heavily in building out our network infrastructure in Germany, the United States, and Europe in order to safeguard our technology leadership in the long term.
• Free cash flow AL (before dividend payments and spectrum investment) is expected to reach around EUR 8.0 billion in 2021. We also expect a strong increase in free cash flow AL in 2022 due to good operational development.
• At the end of 2020, we had the following ratings: BBB with a stable outlook (Standard & Poor’s – S&P); BBB+ with a stable outlook (Fitch); and Baa1 with a negative outlook (Moody’s). Maintaining an investment grade rating within the A– to BBB range will enable us to retain access to the international capital markets and is thus a key component of our finance strategy.
• We are forecasting a slight decrease for our EPS (adjusted for special factors) in 2021. The EPS for 2020 includes a positive effect from the subsequent measurement of the stock options to buy shares in T‑Mobile US received from SoftBank in June 2020. We expect to see a strong increase in adjusted EPS in 2022.

Our debt issuance program puts us in a position to place issues in the international capital markets at short notice, while our commercial paper program enables us to issue short-term papers in the money market. T‑Mobile US is being refinanced primarily in the form of senior secured and unsecured notes.

Bonds and loans in the total amount of EUR 7.2 billion and EUR 7.0 billion will fall due for repayment in 2021 and 2022, respectively. A number of T‑Mobile US bonds include issuer termination rights. If the premature termination and refinancing of these bonds result in economic gains, this could give rise to further refinancing requirements. We plan to issue new bonds in various currencies. The exact financing transactions will depend on developments in the international finance markets. In January 2021, T‑Mobile US placed unsecured notes with a total volume of USD 3 billion on the market. We also intend to cover part of our liquidity requirements by issuing commercial paper.

We want to continue leveraging economies of scale and synergies through suitable partnerships or appropriate acquisitions in our footprint markets. There are no plans, however, to expand into emerging markets. We will continue to subject our existing partnerships and equity investments to regular strategic reassessments with a view to maximizing the value of our Company.

Our expectations for the period until 2022 for the Group and the operating segments as regards our financial and non-financial performance indicators are shown in the following tables. They assume a comparable consolidated group and constant exchange rates. If the economic situation should deteriorate or any unforeseen state or regulatory interventions arise, the expectations expressed here may change accordingly. Given the level of macroeconomic uncertainty in the context of the continuation of the coronavirus pandemic, we cannot rule out the possibility of deviations either. All trends denote year-on-year changes. To indicate the intensity and trends of our forecasts, we apply the following assessment matrix: strong decrease, decrease, slight decrease, stable trend, slight increase, increase, strong increase.

For further information on the development of the non-financial performance indicators of our operating segments, please refer to the section “Expectations for the operating segments.”

In both 2021 and 2022, we intend to achieve a moderate improvement in customer loyalty/satisfaction – which is measured using the TRI*M index performance indicator.

Having achieved a high level of 4.0 – on a scale of 1.0 to 5.0 – on the commitment index in the 2019 employee survey, and in view of the results of the pulse surveys conducted in 2020, we expect the positive response of our employees regarding our Company to remain stable in the next employee survey in 2021.

For further information on our ESG KPIs and our expectations, please refer to the section “Corporate responsibility and non-financial statement.”

Our planning is based on the following exchange rates:

Expectations for Deutsche Telekom AG. The development of business at Deutsche Telekom AG, the Group’s parent company, is reflected particularly in its service relationships with its subsidiaries, the results of the subsidiaries’ domestic reporting units, and other income from subsidiaries, and from associated and related companies. In other words, our subsidiaries’ results from operations and the opportunities and challenges they face are key factors shaping the future development of Deutsche Telekom AG’s figures. Accordingly, in addition to our expectations for the Group, the expectations described on the following pages concerning the operating segments’ revenue and earnings – such as strong competition, regulatory intervention, market and economic expectations, etc. – have an impact on our expectations concerning the development of Deutsche Telekom AG’s future income after taxes.

For the 2020 financial year, we will propose a dividend of EUR 0.60 per dividend-bearing share, which will also serve as a baseline for the dividend for the 2021 financial year. Since the 2019 financial year, the dividend has reflected relative growth in adjusted earnings per share. Based on the aforementioned expectations for our operating segments and the resulting effects, and taking existing retained earnings into account, Deutsche Telekom AG expects to distribute a dividend of at least EUR 0.60 per dividend-bearing share for the 2021 financial year, subject to approval by the relevant bodies and the fulfillment of other legal requirements.