Okay. Hello, everyone. Good morning. I hope you have recovered from our first half day of presentations yesterday. You are ready and eager to take the 2nd installment.
To wake you up, we showed you we gave you Billie Eilish and I'll tell you from here it's going to get even better. So can I please first refer you to our usual disclaimer? Let's move on once you've seen that and what do we have for you today. So as I said, it gets better. We start with Cloudera Nemat and technology, IT and all that stuff that is hard to understand, but it really matters.
When I was an analyst, I had no idea how important this is. And Claudia will show you where we are on all the buzzword stuff, digitization, cloudification, O RAN, all this stuff. I'm glad to say we are right there. We got the nerds. We got the PhDs.
We got the guys from Bangalore and we got the bots and the self learning ones. So let's get cloudified with Claudia. Claudia Niemann?
Thank you, Hannes. A wonderful good morning. It's great to digitally meet you. I hope you are all fine and healthy. For me, it is My 4th Capital Market Day, so special greetings to all of you who have joined us throughout the last decade.
My summary. We actually delivered our CMD promises from 2018. We successfully implemented Our superior production model, meaning we completed our OIP migration with clear benefits regarding customer experience, cost savings and resilience. We had very rigorous IT transformation with significant benefits regarding speed, stability and cost containment. And we further enhanced our integrated network leadership in Germany and Europe and our perception as the 5 gs company in the United States with clear business benefits.
Going forward, we will evolve from a leading telco to experience obsessed tech player, And that means precisely 5 things. Number 1, we are moving a high degree of network automation, high valor like regarding speed, But telco grade regarding security and reliability. On the basis of our increasing cloud native infrastructure and, Over time, disaggregated networks for lower cost and better experience. Number 2, In addition to the digitization of our networks, we continue to digitalize the entire value chain, Sales service GA for better experience at lower cost. To achieve that, we built We are committed to 5 gs leadership in Germany, Europe and the U.
S. And fiber in Germany and Europe. Number 4, to support our ambitious climate targets and to offset, By the way, the massive volume increase in our networks, we commit to double energy efficiency in our network production by 2024. And number 5, experience obsession. As Srini said, Kunzen Zuvensmagen Guides our consumer innovation.
We focus on product experiences that leverage our superior networks. Coming to my review. We completed our all IP migration with clear benefits precisely. In Germany, VIP migration was the necessary basis for broadband availability at scale. As a result, we have today 10 households With speeds above 2 50 Mbps, those are our top super vectoring lines plus fiber households.
In both Germany and Europe, It was the basis for plug and play for all our customers. Today, you take out, plug it into the wall, And it works here you go. It works immediately. As a result, the activation incidents in Germany went down By 40%. And the annual savings we shipped in 2020 mount up to €100,000,000 They are by the way result mainly of our ATM platform shutdowns, leading to energy savings to make that tangible.
When we shut down the ATM platform in Germany in 3 last year, we saved in the subsequent quarter the annual energy consumption of the city of Cologne in just one quarter. Last but not least, I would add that without the IP migration, we would not have mastered the COVID crisis. So Our networks are still in spite of the volume in leases, for example, just 300% in leases. The IP vibration was The digitization project is a decade. Now you might ask what is different at DT compared to other telcos?
2 things. Number 1, we did it 100%. And that is not the case in U. K, Spain, France or Italy. And number 2, in Germany, we did it together with a massive simplification of our aggregation network, the so called BMG migrate, Which is the basis for further automation.
2nd, as I said, we did a super rigorous IT transformation. What is the high back? We actually fundamentally changed the way we work. T and business. From us To then to join teams' joint partners, we radically changed the way we develop software from having only Four so called release containers per year with very time consuming linear planning, testing, Developing, planning, developing, testing and 0 flexibility to a highly adaptive process.
Today, 70% of all features and workload are delivered outside release containers and that means we can flexibly adapt to market requirements and 80% with agile methodologies. Overall, with that, as you can see here, We reduced our time to market from 18 months to 3.5. And we already achieved the promise which I gave 3 years ago. The event target was 6 months, not 3.5 months. So for us, IT speed is key.
Why reduced weight for lower cost and experience. Now in addition to that major speed increase, also, as you can see here, doubled. We doubled visibility of our systems, while at the same time reduced IT spend by €200,000,000 How did we do that? Moved away from silos, for example, here development here, operations, a modern DevOps setup, making sure that operations requirements are being dealt with from the very beginning for less operational incidents and lower cost. We moved away from hierarchies and tailorisms, deal based organizations with relevant investments in future proven capabilities of Our people around the world.
And finally, we moved away from deeply coupled architectures to decoupling architecture, modern AI and microdots. We consider this level of change and speed in industry link. From my point of view, it is how we do things that differentiates us. And for us, the value to becoming a modern tech company. The third point of the superior production model was our integrated fabric leadership.
In Germany, we won all relevant tests. The mobile connects, the 5 gs chip test and the 5 gs innovation world. Our mobile index network perception is 23 percentage points better than the one of the next best competitor. With a population coverage of 80% for 5 gs, I would say we are miles. We are just miles ahead of competition.
And by the way, that is not only the result of Carrier segment position. Our fast rollout is also the result of technology foresight. For example, we were the 1st operator worldwide to highlight dynamic spectrum sharing Require for Superfast rollout, and we were among the 1st operators in the world to commercialize that. In Europe, we are number 1 In our perception in 8 out of 10 markets. And our network in the Netherlands was in ranked the best mobile network in the world.
T Mobile's perception as the 5 gs company in United States has increased by 100% in Q3 2019. And all of that together Many fed our superior networks are the key ingredient for our global brands for our commercial strength and upside going forward. In summary, we delivered, as you can see here, with the dominance of Mimiming Color. Srini and I ranked the RevPAR buyback rollout in Germany with a yellow traffic light. The reason is that we have achieved the planned rollout speed Only are we we will achieve the planned rollout speech only in the last quarter of that year, ramping up to the full 2,000,000 fiber households slightly later than expected.
Coming to the strategy going forward. As I said, very successful tail, a leading tail. We have a superior production model, a crisis resilience. We have vested into future proven capabilities like in deferrals. But being a leading telco might not be enough, like being leading automotive company is no longer enough.
In today's software driven world, that might put you into the role of the one eyed among the lines, and that is not our ambition. We are redefining ourselves. We are redefining the root of our country. Tricam, an experience obsessed Tech player, a tech company obsessed with the experience, Kunzufen, of our customers. And precisely, that means 5 things.
We doubled on our as a network automation, cloudification and disaggregation. We will double down our digitization efforts along the opinion, leveraging what we have And the data and software capabilities of our people. Number 4, hand our integrated network leadership, sorry, another 3 on the basis of fiber and 5 gs. We will double our efforts on energy efficient production, And we will focus on peer addition, best connectivity experience, seamless inlay at home and focused innovations beyond the core. And I will now go into point number 1, Network Automation.
Historically, automation was like this. We analyzed about this, Took out a few steps and then put the result into software. Usually, the speed gains you get amount to 20%, 30%, 100%. Our new solid approach for network rotation has a more significant impact. It was applied first for our new production platform, Next generation S and G, which is, by the way, a multilayered platform, open, fully automated and running out of the cloud.
So what? So this cloud based automation has significant impact on speed. That's what I call it, but help it security wise. Practically, the introduction of a new product feature takes months compared to 18 months before. I pursue ideas in network technology as an IT.
We move from 9 days for rolling out a software feature In the network to only 2 days, and fixing up takes no longer 14 days, but only one day. And finally, no NACHS are required. In June, 1,000,000 fixed customers are live in Germany. But our ambition is to hold all voice and voice customers in Germany and in Europe On 1, JADAF Transformation Framework, it gives us a sense for our data customers on 1 Galliphy platform in 2024.
Improving full slides. To gain lead by nations, it helped better. The benefit, less redundant workforce and more focus on customer experience with High cost effectiveness. So the summarization of the network, tests for new implementation network can reproduce Also in the cloud, a great example of cloud automation is our risk production. Looking at the classic approach to risk production, Telco and the Stary's long term group recovery of their dependency will The silo boom, we've seen the successful support using software in our cloud.
This gives us a better lever for automation. We are pioneering a 3210 We have already achieved a significant milestone. 1,000,000 customers have been mined so far. At the end 2021, the entire FINA network will be cloudified with new 100% automated change from development to validation
So
here's another example. We made fiber planning. Historically, fiber planning included many manual process and most maps It stood only in analog among the components, thus super complex interactions with municipalities. And as a result, I think a typical fiber area Took average 25 days. At the last Capital Market Day, I showed you our demo for what was back then A pilot for a new fully automated fiber planning system.
We actually digitized the map applications for the music And we will stream the analysis here around taking 300 degree picture of surfaces and sensors. And then users Our annualized PowerPoint CRISPR algorithms deliver passive fiber planning. And on that basis, the planning time of the same average area Got review from 25 to 5 days. Today, the system is deployed in 70% of all new areas. So it's up and running, ready for scaling.
Needless to say that it is 1 out of many contributors reducing on net cost by 25% until 2020 4. And for sure, it's one of the necessary conditions for doing the fiber rollout so fast. Okay. Now let's go to another aspect, network
Historically,
we have acquired large systems. In the future, the systems will be smaller and soft hardware gets decoupled, making hardware much cheaper because we can use standard hardware. One well known example is O RAN, open radio access networks, what you can see here. In our days The radio access network, the radio unit on top of the antenna pole and the basement unit down in the gray box all need to come from the same vendors. The stuff within the BPU comes from the same vendor, 2 gs, 3 4 gs and 5 gs and all antennas in one area.
The advantage, high spectrum efficiency and high performance. The disadvantage, limited choice and higher CO. This topic is being addressed in O RAN. Now all these components I mentioned can come from different Vendors. On top, we deploy software on a standard hardware rack.
This then can look like that. That's an Oran based unit. You see standard hardware racks And software deployed on that. The advantage, more choice, lower TCFO. The challenge for the industry, End to end integration and automation.
And I will now explain you back on stage how we are addressing that. So as I said, end to end integration and automation. So, Deutsche Telekom It was actually the 1st operator in Europe to set up an open test and integrate lab in Berlin to test And operate exactly that, end to end testing and integration. The web is, by the way, open for all suppliers and our Competitors. And in addition, in the second half of this year, We intend to start Orang Town around now Brandenburg, which will deploy Orang technology to actually test it in our real in our productive network.
But this aggregation does not only happen in the mobile access, also in fixed. We call it 4.0. Based on the aggregation networkification We did, together with the IP transformation in Germany, now that's the simplification of the aggregation network was the result The way we did the IP transformation in Germany, which is, by the way, another differentiator. And based on that, we created a fully Disaggregated Edge Cloud Simplified Fixed Broadband Access. As a pilot, it is alive, By the way, the world's 1st fixed disaggregated access line.
And the next step, of course, is work with the industry ecosystem To adopt those principles. In a nutshell, we are prepared. We have the capabilities in place to get it done As soon as the technology and the ecosystem matures, What I assume with regard to Oran in the next 2 to 5 years to happen. But we are not only digitizing the network, but the entire value chain. And that chart shows 2 counts.
1 is our easy fiber ordering and configuring and provisioning system For our customers, with the previous legacy IT, it took 7 super some interactions for the customers to order Fibrex Action. Now only 2 very intuitive and easy ones are required, That system is cloud based for all channels. And next year, the complete fiber rollout will be processed throughout this platform, which is another contributor For the speedy fiber rollout Srini mentioned. The other example here on the chart is our award winning bot, Fagmagenta, The digital assistant that supports our services organization through automation. By now, More than 2,000,000 issues were solved, and its independent solution rate without human help is 37%.
Sveinj pointed it out in his speech, our belief is to combine human service with digitalization, AI enabled, advanced, augmented. And our ambition is to have all service interactions augmented By AI or algorithms by 2025. And again, As I explained before, this is based on our industry leading IT in terms of speed, flexibility and stability. And now our ambition is to move one step further and create a world class IT. And that means That we will move to a very high degree of truly crowded native infrastructure, 80% in IT and 55% for NT Across Germany and Europe.
Plus, we will massively increase APIs at microservices, which means further decoupling the architecture. And we will, of course, retire. And if you express that in KPIs, we will Further increased decreased sorry, decreased time to market down to 2 months with 100 percent agile working. Stability will further increase, and the IT spend will go down by at least another €200,000,000 Which is a most significant contributor to the message Srini gave, fiber rollout, Self funded. And why can we do that?
Because we are driving a capability and culture Let me explain how we work. Traditional corporate thinking oscillates between centralization bias to The synergy and decentralization by supply speed. I'm a fan of speed and experience because in other words, infrastructure accountabilities. On the other hand, For those of you who got educated in the software rather in the toy industry, it's clear that you need economies of skill and scale When you want to get done the stuff, I mentioned like the sailing or tension plan. There's no way, no way to prevent the wheel for that in every country location if you want to get it done.
Our solution is a modern general type organization, which actually combines the best of both worlds. All IT and product people were totally decentral with the businesses, for example, on the automated file binding or on the gigabit delivery system on the 5 gs roll At the same time, every human being here in technology and innovation is part of a global Skill chapter. For example, for software engineers, network engineers, data scientists or AI specialists. And the purpose of those chapters is to make sure to really make sure that everyone has her or his individual skill journey And at the same time, to make sure that we have the right number of people with the right number of capabilities in place from a global perspective Because that goes across Europe, Germany, Russia and India. Today, we have, by By the way, in my board area, 2,800 people with skills like software engineering, DevOps, data scientists or modern architecture skills, That's 23%.
And as you can see here on that slide, that number will go up at least to 45% by 20 24. Coming to the point number 3. We will remain network experience leader. Now Sriniv and Dominik talked about our ambition for 5 gs and for fiber And Mike at Neville Acht, Mobile U. S, so I will not repeat that.
I just want to say to Bridge the Linked presentation That in addition to our ambition of being the 5 gs and fiber enabled technology experience and product innovation leader, We will also ensure always that we use our toolbox of best technology combinations, our own As well as the parties. And that will include 4 gs5 gs hybrid routers, but it also includes broadband separation for global IoT. So coming back to 5 gs. A couple of years ago, the TechPre hyped 5 gs as the solution to everything, including world hunger. And then a few years later, the finance analyst community challenged 5 gs as a driver for growth.
Now our conviction is my conviction is we are convinced by 5 gs. We are convinced by the comprehensive benefit of 5 gs, and I have summarized them on this slide. 1st of all, Following up on what Dominik and Srini said, 5G is the basis for up and cross selling in the consumer area. Number 5, a key enabler for B2B differentiation and upside potential. Huawei, together with IoT, edge and network slicing.
The letter being made available through into orchestration 5% alone. But network slides could deliver the latency slides For those who want to over their compass notes or IoT slides, if you have market sense. Another advantage is 5 has a higher KPI's efficiency than 4 gs only. We assumed that the CapEx per ton speed will go down by 40% by 20 24 per mbps. Another aspect, the 3 gs shutdown, together with 5 gs, is one contributor to our energy efficiency.
And last But not least, there's a topic of fixed wireless access development in United States and Europe. And I would say, let's listen
But drones or autonomous guided vehicles. One additional advantage, the managed data can stay on campus. And our first campus networks was for Osram The largest campus network we signed so far for the Hannover Fair. It emphasized our ambition to shape Industry 4.0. And the HHI Sky Campus Demonstrates this distinct value, for example, to make CT or MRT pictures available anytime on any mobile device On a large medical campus in a secure way.
Okay. Coming to the next topic, green. What is pretty obvious, Our society's past carbon neutrality and production will be entirely, intelligently impossible without digital technology. And Deutsche Telekom is an important enabler. The COVID crisis showed video conferences reduced travel significant, And the digital transportation is a super mega triple to CO emissions.
Digital Technologies enable a more diligent reduced waste and CO2 footprints in logistical chains and the basis for smart electricity bids and smart homes. So super. Nevertheless, as an industry, we need to look at our own emissions as well. As Jim pointed out yesterday, we commit to carbon neutral regarding our own emissions, 1 and 2 by 2025. Already this year, we will use around the entire might mention that as well, Electricity from only renewable source.
For your info, electricity counts around 85% of our emissions, meaning in our own emission, we have moved ahead. We also predict to be CO neutral in scope 3 For our supply chain, latest by 40. But and for me, this is very important. We have started To put major emphasis on this carbon footprint, energy efficiency and waste avoidance in all our fields with our partners. What challenge?
Elepti, including green electricity, the way, of course, also a cost factor. And the data volume growth For all of us, we have at least €0.25 per annum. And to offset this volume increase, so to keep our energy consumption stable, To keep our SG and A stable, we will double our energy efficiency by 2024. Energy efficiency defined a space between the giga you produce and the watt hours needed to produce them. What are the pieces To do that, big lever returns.
I talked about ATM, SDH will come next, our 3 d mentioned 3 gs, And other levers are things like network address sharing or, again, using algorithms and AI to do, for instance, smarter steering with the antenna with the scheduler. Another point are more efficient data centers and, of course, The copper to fiber migration. So this is our plan, doubling down on energy efficiency to keep the consumption stable, to move credibly Along the green path. My last point is about the consumer experiences. Delightful home experiences are, of course, built on our best networks, and we focus on 3 experiences: Of course, the best connectivity experience anywhere, a seamless interplay of all our products, Magenta Smart Home, Magenta Gaming, the apps for the telecom routers or Hello Magenta.
And in a very focused manner, We innovate MonsterCore, for example, nogenta gaming offering on the cloud gaming platform. For better experience, we focus on 3 NA plus Volification, again, big data and AI, service orchestration. So that's the summary. And let me explain what is behind that on that chart. 1st, experience productivity.
Our customers expect That has table and trust connection anywhere in their home or in the office like at the curb. It's often different, a ticker problem with the telco industry. In spite of having a super fiber or super electric line Connection might have issues. Why? Because the caller uses the wrong router for her or his exes line.
He or she might have put the router at the place. I visited many homes, and you wouldn't wonder very often I found it behind the fish tank or the bookshelf. Sometimes the cabling in a house is outdated as is the access point. And also, We have the phenomenon that the interferences of the enabling Wi Fi is disturbed. Obviously, there are Some nontechnical solutions to that challenge, which is that our self-service solutions convince our customers to take the right route into space.
Now Other more automated solutions require a different technology, more precisely, a new router operating logic. What does it do? Again, It decouples software and hardware. So you see that's also my pet topic here. And It does real time analysis of the connectivity data, again, based on algorithms and SI.
And then as a result, You can support Aftermar with automated installment, a mesh Wi Fi placement tool or and that's what we're going to do in Croatia, The router chooses automatically the best channel, and it also supports predictive maintenance for ourselves. Today, we have, In Europe, 1,000,000 customers who got the new router opening system. Our ambition is to enable 75% of entire Deutsche Telekom router base in Germany and in Europe with that new logic, 1st or second generation Until 2024. Next topic, experience the seamless interplay. Our customers expect Super, super simple and intuitive, onboarding, upgrading and operating of any new devices.
My personal benchmark is the Apple experience From one mouth as Einogus really seamless. Now to get that done, we've built a new API first orchestration layer that acts as glue between the different services and devices. And with that, you can, for example, on your TV screen, Show the QR code of your home Wi Fi to the deck of your friends of your children or you can get My mother called notification on the screen or on the TV screen that someone ringing at the door. So Our ambition is by the way, it's being rolled out this year with already today 200,000 engaged customers on our smart home offering. And our ambition is to have 90% of our customer base across Germany and Europe enabled with that.
And last but not least, Our voiceification platform, the idea is not to compete against OTTs, but the objective is to voiceify all our services. And our ambition is, By 2024, to have all DT services voice enabled. But let us have a look at the homes of our customers.
The future of Deutsche Telekom's home experience will be seamless and simple. Safe, privacy respecting, personalized, Truly human centered. Our ambition? Become the experience leader in the connected home. The foundation is laid today with the next generation of routers designed by us and a new platform allowing seamless interplay of our Turning on safe kids settings when adults are in the house setting call notifications on the TV screen when we watch a movie or technologies like real time data analytics, AI and an API first orchestration layer for Seamless interplay between the various services.
All by the way enabled by our voiceification platform. We'll
To sum it up, here you can see our midterm ambition level. It's a commitment to further rollout in Europe, a commitment to enhancing 5 gs leadership, a commitment to enhancing customer experience innovation leadership. On value transformations, our commitment or correlation, superfast time to month, share of edge 100 percent, e spend reduction Buy at least CHF200 1,000,000 and as I said, keep the energy consumption stable. Now, Hanni, for me one final remark. I believe what really differentiates us is the way how we do things, and I will share with you the big one.
I have this ambition transformers, as I said before, Into an experience obsessed tech player, which is tech more than a tech company. And it means in true human tech, Kunsten Defense Machen, Investing into digital abilities for our people, turn shoulders to fence and increase shareholder value. And by the way, don't forget, have Trusted relationships, our technology partners within this fragile world, the competitive global supply chain is also a differentiator. And last but not least, for me, it means also to be responsible digitally, socially. All that elements cut And for me, partly, it's why I love to be here in this management.
We get up every morning, right, to make
Lovely. That was it's a great vision and it's not just a vision becoming very tangible for our customers with the help of the great teams that we've put together. So we've got time for, I think, about 4 people, 15 minutes. I'll start with Usman, Usman Fjernberg.
Good to see you again.
Hey, thank you. Thank you very much. I just have one clarification and then two questions, please. The clarification I was just seeing was in the final slide you show the percentage of cloudify production. Is this showing the data, the amount of data that you're looking to print out networks and if so, Republic or Cloud that you're referring to.
So that was the first question. This question was just on the specific that you gave and what the other presentation on the 40% reduction in the cost per peak throughput. I'm just wondering that seems a bit conservative and more spectrum In 5 gs with you have 4 times more spectral officially with massive MIMO. So I mean other operators have spoken more like 90% Cost of that kind of reduction going into 5 gs. So your comments there would be interesting.
And then my final question was just on becoming Becoming more
of a sorry company, of
course, you can focus on connectivity. Could you share with us perhaps what proportion of network functions have been virtualized Today, where you expect that to get to and on software developers, are you seeing that this is an issue when firing It's kind of a length when there's already a lot of competition for it.
Okay. So I start with question 1. It's indeed our workload, 80% of our workload in T internationally and 35% work workout. And it is a combination of cloud and also buyout Especially in the we now work intensively where could we buy part days on that one. So second question.
Good. So what that is by 2024 To use gigabit per second. So for top speed, it's a relevant number. We will have that efficiency. And one way this has a number of contributors.
As you are referring to massive versus the new antennas to just give a flavor, if you looked us at the 32x30 Massive antenna deployed 3. Gigahertz compared to 2x2 4 gs5 gs traditional antenna, You will find that the power used is twice as high. But when you look at it, Antenna, in relative terms, it is down about 20%. But as I said, it is one contributor. It's not only about this active element.
This is actually, I think, how you need to read it. So the last question was?
I would say it's
also the fat and spectral efficiency seems like
a big part of that. Yes.
I absolutely
have. We could look at that. Let me see. The last question was around The cloudification, yes. 1, it's the our voice and the platform, which We intend to actually use that Automotive framework and the qualified platform for our customers are 20 24,000,000 customers.
But the bit, as you know, cost Item is in the access network, fixed access network and mobile access network. And here, As I also mentioned before, technology is not yet mature. We expect to mature in the next 2 to 5 years. Then also the Excess part of the network will be cloudified as well, yes? So the cloudification happens together with the disaggregation and the further automation.
Yes. Another question, oddly difficult to get people. Yes, you see, I'm actually extremely proud of having a few Super Frika, also from the United States. So I'm super proud actually of my very international team and of people who are real Geeks. Having said that, I also strongly believe when you look at the mass of people that in addition to hiring, We need to invest for social and financial reasons also in the capability building of our both network and software engineers.
So we pursue An approach where we combine that.
Very good. So the next question then, thank you, Usman, is from Ulrich at Jefferies.
Yes. Thanks very much. I have 3 shorter questions, if I may. First one is, I'm interested in the comparison of how you see DT Positioned within the industry, where is DT ahead? Where is it behind?
I suppose your choice of CapEx probably tells us where you think DT is ahead. So the question really is where might you be behind and where's the opportunity relative to your peers? The second question is on Orion. You mentioned that. And I suppose it's a Difficult question to answer simply, but how far is O RAN from mass deployment at DT or many years?
And my last question is a bit philosophical, but I mean, with every I mean, much of the efficiency gains in your area come from Taking our complexity, which has been layered on in past technology cycles, I suppose, that seems to be a bit of a hamster wheel. Is there any reason to expect That this hamster wheel slows down with the current technology cycle, so that in 5 years' time, we're not going to talk about delayering whatever has been The dawn in 2021, if you see what I mean. Thank you.
Okay. So I start with where we are ahead and where do I see Cypotential. I hope I made clear that when it comes to our 5 gs positioning in Germany and Europe And you heard yesterday the U. S. Team.
And honestly, I see competition miles behind us. And I can ensure you one thing. We will make sure that this remains like that. In any dimension, if you talk about Scope, if you talk about fiber backhauling, if you talk about the top speed, so number 1. And by the way, also in our ambition to be integrated network leadership, And you see it from the customer feedback and the results so in the network.
Also, I would say, and I mentioned that in my talk, We have really an advantage, Srinik called it tailwind, for having completed the IP migration. Because without having done that, you run into intrinsic complexity. For example, the next level of automation And this aggregation, which I mentioned for the fixed line network, when you want to virtualize that and use different vendors with lower hardware cost, Requires a level of simplification. And we really did it 100%, and we did it together with that access disaggregation, yes? And also based on Some of the topics which I mentioned, the leverage of AI in fiber planning and the that very radical Approach to automation on our platform, I think, enables us in the future to capture the potential Because I would view it if I were you like this, we have proven this.
And now we are scaling. And because our ability to scale, We are able to execute, for example, in what Vinny said, cyber, upscale, self funded, yes? So that is scaling opportunity. To be honest, I think we are really industry leading when it comes to radicality of transformation, capability, stability and speed. We are not world class when it comes to cost.
We are actually in the 3rd quartile, yes? So in the upper third quartile, and that is also an Upside potential, which I laid out here in the presentation. Yes. And on the digitization front end, Sweeny and Dominik talked about it. I think
we are also in a very
good way with With Magenta Bot and so on. So I see us, honestly, ahead in middle dimensions. But of course, we have put with exact that upside position together a totally different level of automation. Now I think, Oren, The question is when it mature for lead operators like us and others. And my estimation is to connect 2 to 5 years.
But what can what I also want to say here, it will be a relevant component in the next request for proposal once to network modernization in Germany. And then the last question, complexity, answer will
yes. But that this is just another in store of a regular cycle or whether we are talking about something that is a structural change that will let it say last given more stability.
I believe Once you have the Microservices API and high degree of collection, which forces you to take, yes, you have actually achieved a Very strong level of expectation and then you can take it, yes, on what areas you put your additional investments. So I see it's more evolutionary, But we're more than just the historic automations where you always take out the next complexity.
Good. Okay. So next Thank you, Ruvi. And next we have James at New Street. Hi, James.
Yes. Good morning. Thank you, Anders, and good morning, Claudio, and thank you for taking the questions. So I'd have Two questions, please, Claudio. The first one, we're going back to the slide where you talk about the comprehensive benefits from 5 gs.
In particular, I'm really interested in the point you made around higher CapEx Efficiency, interesting to kind of just dig into that a little bit more. What are your plans within Deutsche Telekom for further of your macro cell grid, I mean, do you think that's actually needed at all given some of the efficiencies that come With 5 gs, I heard Suni yesterday talked a little bit about small cell build plans in Germany as well. So maybe you could kind of layer Thoughts around that into the answer too, please. And then the second question I had, very interested in the developments in the private campus network, SAIS and B2B, could you talk a little bit about how you actually see the competitive environment there? Has Deutsche Telekom Tom has an advantage that you see competition in particular from non MNO players who can share life feedback from to compete in that area.
Thank you.
Okay. Thank you for the question. I'll pass the first one on the macro and small cells. So 5 gs Now the volume increase in some areas, potentially, yes. We assume that 5 gs deployment will kick in Around 2023, 2024.
And it will really depend on deployment of our macro The German team, for example, assumes 1,000 small cell in addition to the backhaul sales in place by 2024. Then the next question was around the Campus Network, no? Campus Network, private versus public. What we actually see with our customers, Different horses for different courses. There's a number of customers who have a combination of public and private or only public.
For example, what you saw in the video, The Stripps network at the university hotel was actually based on a public network. And why is that? Because the customers want to also have Mobility use cases which move beyond the boundaries of campus networks, yes? And so therefore, we see a need for Public campus network solutions or combined ones. Now in Germany, as you see, we have the very specific situation that private spectrum was granted.
But what we see that 60% of those who asked for that private spectrum are basically universities or research institutions or certain manufacturers. For the other 40% who applied for these pharmacies, I assume a Combination of Deutsche Telekom together with vendors will do it. Now your question was also how are we positioned Against others, the feedback we get actually very well, in particular when thinking about the combination of Campus, IoT Connectivity and Edge Club. I also need to say that I believe of today, the market is still in an early stage, yes, and will probably take Up at the moment, the full benefits of network slicing come live.
Great. Just also maybe to add On the first question, we had a lot of densification network densification last few years. We extended our site Footprint will have extended by the end of this year by about 6,000 in Southern German. A lot of that was actually densification, so we have a very strong Great, right, next. Thanks, James.
See you soon. Next is from Robert at Deutsche Bank.
Thank you very much. Andrew, I would like to follow-up on OpenManc with Cloudera, if may. Some people think that the complexity of multiple interfaces from multiple vendors Within an O RAN environment will leave you as dependent on a few specialist aggregators in the same way you are dependent on a few mobile equipment vendors today. Do you think that's a risk for Deutsche Telekom? Or is it an advantage perhaps where you guys can manage the complexity yourselves, whereas smaller players may struggle?
And a quick aside is, can Open RAN be as green as conventional technology? Or do you think there's a trade off there? Thanks.
So, Robert, great question. So first of all, I think it's going to be very difficult for smaller telcos. I think it's an advantage for us. Having said that, I view the world not evolving to best of fit and then being dependent on just one integrator, But rather best of sweet, I expect certain ecosystems to avoid certain preconditions. I believe also if you want to capture the full TCO benefit, you as I tell you, you will not go into software development, so don't be scared, Yes.
We are not going to develop network virtualized network functions, but you need to have certain network integration capabilities in place. And I think I Showed on one of my slides, we have that based on the work we did with Axis 4.0 and Oren. So I believe actually it is an advantage, Yes. But in the end, it will not be a case where totally disconnected components get acquired and then all the TCO gainings you have, you waste By spending all the money for an integrator.
It's going on.
It must be. So our view is, yes, yes. So there is when you really Get the end to end automation done. And honestly, from a technical perspective, I don't see any reason why not to do it, Yes. What prevents progress from happening is, of course, the ability to capture value in the expensive hardware systems, yes?
So I don't see any technical reason with the end to end automation why O RAN shouldn't be as green as single run. You're right. Today, it's not yet. And this is why I said we still need to Some of these technical challenges.
Excellent. And thank you, Robert. And the last question then is for this round is from Andrew at Goldman Sachs.
Yes. Hi, thanks. Thanks very much for the presentation. I thought it was really helpful in terms of understanding new technologies and your progress. What I'm still struggling a little bit with is just how your mobile network will step up versus your peers By 2024, it's really hard to kind of get a real sense on specifics in terms of how you're going to look.
So we've heard from O2 that they're going to get to around 35,000 towers by the mid-2020s with similar spectrum per customer to you. The Vodafone, we know is going to have around 35,000 towers, But with more spectrum per customer to you. I'm not really sure on where the fiber backhaul differences are between you. So the question really is where will you end up on number of towers in your 2024 plan? Will you need more additional spectrum versus your peers?
And only We increased or see a reduction in your network superiority versus peers.
So We will continue to have a superior network towards our peers. And I need to say, and I'm realizing you want to also say something. In the end, it's a combination, a combination of the spectrum position which you have any time. It is a question of coverage. It's a question of where you have the power.
It is also the question not to be underestimated on certain technological insight. And the moment you test it, you are not talking about it widespread. Yes, our time spectrum sharing thing is really a coup, I would say, when we roll it out. And there is a question around the 3.8 Massive MIMO in the city. And don't underestimate, we will always observe Our peers by the way, I forget the fiber backhauling, our intensive fiber backhauling.
So we will always observe our peers and then, if necessary, Work on an adaption of the parameters.
I think you could have asked the same question a few years ago or even longer. The spectrum was Look, I mean, if one of our competitors even had a lot more spectrum now. And now we have a very competitive spectrum position, best backhaul composition. We'll have more than the numbers that you have quoted because they include the white spots that time and that's a shame that we have those 2 and we have a build out rate that is way higher than anyone else. We've always been the best on coverage And don't worry about it, okay?
So that's a great way
You wouldn't worry at all, please. Don't worry, yes? So whatever happens, we will be A step
ahead. Good. Good. Excellent.
So thank you very much. Thank you, Claudia. Thank you, Andrew. And that brings us to the close of this session. And now I'm happy to welcome Adel next.
Adel is going to talk about Adel Cloud is talking about how we digitize ourselves. He's going about how we digitize our customers and how we enable the cloud in Germany and elsewhere. And It's been quite a journey last few years, some headwinds, but I think a lot of stuff got done. So let's hear what has got done and how we take this forward. Thank you.
Next is Adel. Adel, I'll answer the
line.
Thank you, Hannes. Good morning, good afternoon, good evening, wherever you're from. It's good to be with you. But we all feel like in a Gitellican pop band, we're all wearing the same jackets. And I promise you, we all have our own jackets, right?
So no sharing. Anyway, look, it's been exactly 3 years since I stood in front of you, it was a lot, I talked about systems. And at that point in time, when I spent time with you, I got many questions. I said, look, we're not sure what T Systems is all about. Why is it continuing to be a Bleeding business within Deutsche Telekom.
What are you going to do about it? How are you going to position the company? And 5 months into my role in 2018, I shared with you the journey that we're going to get into in order to clarify those questions and fix the business as we go forward. So what I'll do today is I'm going to share with you the journey and what exactly have we done, but also more importantly, talk about what happens In the next 4 years in front of us. Well, let me go ahead and get started.
So first of all, it's really important to say that the transformation that we put key systems on has progressed. As a matter of fact, hopefully, you realize after the presentation, what we have today It's a very different company from what we had 3 years ago. Clearly, it didn't turn out exactly how we planned. So there were things that well, Things that were challenging and we struggled with. But at the end of the day, the biggest thing that we've accomplished is a new portfolio for T Systems That is 100 percent IT services focused company.
So that's point number 1. Point number 2, Different than what DT Group experienced, we actually did see a big impact from COVID crisis in 2020. After a very good 2019, A lot of our customers were hit. 60% of T Systems' business is concentrated in automotive, industrial manufacturing, travel and transportation. The industries that were hit the most, if you will, with the COVID crisis.
Many of our customers were shut down and not even able to communicate with us and not able to Continue their transformational programs or the projects that they were on. So we felt that pain. And the biggest issue we faced, of course, is the revenue development in T Systems during 2020, but also the delay of transformation, which we, by the way, put on track as we went forward. The third point I hopefully will come across clear is, as we went through the 3 years, we have evolved our strategy. So now being an IT focused services player, our strategy to be the European leader is Cloud transformations, cloud operations, digital enabler and digital solutions with secure sovereign Capabilities that our customers are looking for.
And I'm going to share that strategy with you on how we go how we take the company going forward. The 4th point is We have a very clear road map how to build value going forward. We know exactly what we need to do to accelerate our EBITDA growth, and I will Share that with you as well throughout presentation. And finally, I'll share the financial outlook, which we are confident in to deliver 5% Compounded annual growth through the planning period and get ourselves to a positive cash contribution. That are the key points.
And now I want to get into the details of exactly what happened. Now before I dive into all of the granular information, I wanted to step back for a second And share with you the journey that we've been on. And I look at it in 3 phases for T Systems. Phase number 1, which was 2017, 2018, this is when I walked Then a little bit before that I joined the company, it was all around stabilizing the company. You remember The troubled contract, I had a lot of questions from you when we got to May of 2018.
What are you going to do about this contract? Is it more than your peers? How do you control it going forward? It was also about launching a new cultural transformation within T Systems, to think differently, To evolve. And we've done that through 2017 and 2018.
I don't think we've read newspapers. End of our pro contracts. We met in 2018. We launched every ambitious culture, 20,000 employees is paid in that. We've enabled more like 70% of our Phase number 2, and you'll recall it when I go to the next slide, was about this 4th pillar strategy, a tactical strategy that was focused on things with T cells And it was 2020, and we're ending it in 2021.
We now entered a new phase with the evolved strategy and evolved into this model, Consistently performing company going forward. That is going to visualize for us to go now through the different areas. Talk about 2018 through 2020, Page, which was about the 4 pillar strand. The 4 pillars were: number 1, the portfolio number 2, fix your go to market Number 3, we're going to do your delivery. And number 4 was about your SG and A.
What do you do with the overhead? Let me go through this very, very quick. First of all, on the portfolio, Huge accomplishments here. One is we changed the business model of the company. We created a portfolio driven logic where the P and L sat in the company away from the divisional structure.
We got clarity where do we make money, how do we compete, how can we make how can we grow, Do we have the right to play in some of these areas? And through a bunch of decisions, things that we stopped, for example, end user service, which is painful on the top line, It was a business we decided we're not going to do anymore, and we continue to bleed that out from the company. 2nd was exiting some of the geographies where we didn't see future for us, Like South Africa, like Malaysia, which we're in the final phases of exiting. We also did a very important deal partnership deal with IBM where we change the fundamentals how we deliver mainframe services, changing from a CapEx heavy model to an OpEx model, Accessing technology as fast as it becomes available. But the biggest component of our portfolio was about moving the connectivity businesses From T Systems into telecom Deutschland.
It was very clear to me as soon as I started digging down the organization that the value chain of delivering TC Services business was usually fragmented in B2B Between T Systems, TDG, global wholesale, etcetera. And we decided as a team that it didn't make any sense. We're going to put it together with Srini, so he has the end to end value chain to deliver the service. And he talked about that yesterday. That was the big Change in our portfolio as we went forward.
The second area was about the integrated go to market. We were very fragmented in how we covered the market. We created an integrated sales force. We digitized that sales force through deployment of salesforce.com as a technology. It's now a data driven Management of our sales capabilities.
And very important, we rebranded ourselves. We repositioned ourselves. I don't know how many you've seen, the missing TCAM, Which by the way, won the Effie Award, which is a very prestigious award in branding and positioning. And we start talking about that connectivity, security, cloud, digital as our key portfolio elements. The third area was about our delivery.
We were very heavy dependent on high cost locations, and we set ourselves to make sure we changed that. By our first of all, building up India, we went from almost 0 headcount in 2018 to over 2,000 people today. We're very proud of that team. We shifted a lot of our high cost locations from a delivery into lower cost locations. We declare that we have a four Country delivery strategy.
Germany, of course, as a foundation, but also Slovakia, Hungary, India and Russia, where we have a lot of software development. And we started building scale in these areas. And that drove a lot of synergies across the company. And the last pillar, Of course, it was about taking cost out of SG and A. I focused initially at SG and A.
I thought that was the First area we needed to address. So we looked at layers, managers, executives, removed almost 40% executives from the company. We removed several layers of management, 4 layers of management. We deployed agile organization structures. We reduced our HR, finance, G and A functions by 30% plus.
And at the end, we delivered EUR 300,000,000 net IDC savings. That's over 10% of our IDC capabilities in T Systems. We deployed agile structure across the organization, so we work differently. And there is more to come in this area, but that was what drove our EBITDA expansion in 2019 of 17%. Now all these four pillars, they were underpinned with our cultural transformation journey and a very tight management system to the And that's what made the difference for us over the last several years.
Now that is just a quick summary. And I already talked about the €300,000,000 net savings, And it was driven really by 4 key areas. Number 1, our sales organization. As we integrated it, we saw a lot of duplication ability to take some of the cost out. 2nd was about delivery integration and moving things offshore into lower cost locations.
We went from about 20% of low cost occasions of our total population to 30% in 2020. 3rd was overhead reduction, we talked about it. And the last one was, of course, overhead reductions. And I want to highlight that not only did we take headcount out of Germany, about 1600 net reduction, which is about 11%. We also took headcount almost 2,000 people net from our other high cost locations and move that work a portion of that work into the lower cost locations.
That's what drove our IDC savings through the period. But we've had headwinds. I mean, I thought you said about the impact of COVID. The biggest headwind we have was the revenue development. When I stood in front of you in May 2018, I said our plan is to keep revenue stable or growing At low levels, 1%.
Well, we didn't get there. That is the big challenge. Now one of the things, of course, that drove the revenue down is Our decisions to exit certain businesses like end user services. By the way, through this planning period, it was EUR 180,000,000 reduction on top line. Also, of course, the COVID impact that we have.
But nonetheless, when you looked at the shift into the growth areas, it did not Go as well as we were hoping for. It was slower. Although we had excellent growth in our public cloud Over 30%, very strong growth in our security. Our digital solutions was a disappointment where we declined minus 2 After going first from 2018 to 2019, in 2020, we saw big headwinds for that. And our MIS business, our infrastructure business, Decline at about 8%, but if you normalize for the end user service, it's about minus 4%.
So that did not give us the growth dynamic that we wanted. Although we did shift more of our business into the growth areas from 38% Of our total business in 2018 to over 47% in 2020. And by the way, that will continue for us going forward. But that was our biggest challenge because that 1% growth would have expanded EBITDA much faster than what we've seen. If you normalize for things
by the
way, if you normalize for user services, our revenue would have been minus 1% over the period and our EBITDA would be plus 1%. So challenging for us in 2020. Now Let me go through the actual commitments that we made to you in May 2018 versus where do we expect to be landing in 2021. So first of all, Our revenue was said. That's the element we could not we did not deliver on, right?
We're declining minus 3% compared to what we promised, which was either flat business or a +1%. 2nd was our EBITDA performance. We rated ourselves amber here because if you normalize for the portfolio shifts and some of the COVID crisis, we actually have a very strong EBITDA performance of +1 percent given all of the changes that we were doing within the company. CapEx, We decreased our CapEx from a little bit closer to about €300,000,000 run rate to about €250,000,000 And by the way, we expect to keep it like that. Our CapEx is between 5% 6% of our revenue.
I would like to drive it in the lower 5% and even below 5% as we progress this business going forward. Our special factors, we dropped it slightly from the run rates that we had, but we kept it pretty much stable Throughout the period. So we did not escalate after a big bump in 2019. We brought it down to exact levels that we were, which are about EUR 160,000,000 EUR 170,000,000. Cash contribution, I committed to you in May of 2018 that we will get the business to a cash contribution breakeven By 2020, well, in old key systems, when we still had the TC services, we achieved that.
I would say we achieved that with by hook and crook in different ways than what we envisioned, but we got there. The new T Systems needs another couple of years to achieve Cash breakeven after we moved profitable business of TCN into the ADG business. And of course, our indirect cost was better than what I promised you. We talked about €100,000,000 of net savings in May of 2018. We delivered €300,000,000 Plus more to come in the future.
Our EBITDA margin, we expanded by 2 points and our TRIM continued to be one of the best in the industry. We consistently score in the top quartile of our competitors with high-80s trim performance. So all in all, challenging 3 years, lots of things happened, a very different company we have today versus what we had in the past. We're proud of where we are, but we still have a lot of challenges in front of us to address. So we are not done with where we want the T Systems to be.
So what is the strategy going forward? So first of all, is it important to just step back and realize that we now have An IT services company focused on Europe and select countries around the world. That is number 1 in Germany. That is number 2 in DACH. We serve majority of the DACH's 30 companies.
We have 8 strategically located security operations center across the world. We manage close to 600 petabytes of storage. By the way, we grow every month half a petabyte, about 100,000 servers across the world through 16 data centers. And We're operating in 20 countries, not in every country the same because some of the countries are more delivery organizations With 28,000 people across the world. Out of the 28,000, about 12.5 sit in Germany.
Out of 28,000, 12.5 sits in Germany. So we've shifted that population to be balanced across the world. That is who we are today, A very different company from what we were 3 years ago with a clear portfolio, which I will expand on in a few minutes and a clear path to value creation as we go forward. We operate as this IT services company in a very buoyant And a very fast moving market environment. You heard Tim talk about digitize, digitize, digitize where all of our customers are on that path.
Digitization is a matter of survival now. And that drives a lot of the consumption and a lot of the spend in the marketplace. Now the buyers are changing as well from not only being the CIO into more of a business line managers. So the guys like Srini, who are making the decisions, how do they digitize their companies. So we had to expand our customer contacts and our go to market to cover these business leaders in the marketplace.
Of course, COVID accelerated The investments, initially, it froze everything in 2020, but it is accelerating digitization as we go forward. No doubt about that. And cloud, As the biggest technology in terms of adoption is the enabler of digitization as we go forward. Now that gives The European countries, the European market at about 4% to 5% growth going forward. And this is an opportunity because only 10% Of Germany has been digitized so far.
So it's a huge opportunity to come going forward. There is also this European sentiment of sovereignty that's becoming stronger and stronger and stronger. And this is an opportunity for us being a European player. It is not just in Germany, it's across the European EU, European Union member states And it's accelerating. Of course, data protection, security continues to be a very, very big topic.
So those are the dynamics in the marketplace. So the question is, Why T Systems? How can T Systems participate in this? So again, repeating some of the things I said. Number 1, We are a big player.
We are number 1 in Germany. We are bigger than our competitors, DXC, Accenture, we're equal in share, by the way, with IBM. So we share the number one spot before IBM splits the company. After that, we will become number 1, again, undisputed number 1. And we're number 2 in DACH.
And in several select countries, we're in the top 10. So we are a player with credibility. The second thing is we have proven market Leadership and engineering capability when it comes to infrastructure management, transition to cloud and digital capability. And I'll use a few examples while I go through the presentation. 3rd, we have the industry expertise, especially in the industries that we have selected.
We have deep knowledge how these customers work. We have deep industry solutions, and we have horizontal Platforms that can apply to any industry. And lastly, we have a very long standing Client relationships. Just last year in Q4, we renewed over 2,000,000,000 worth of contracts that extend our relationships with the like of Shell, DPDHL, Heineken, Adidas For another 5, 7, 10 years after having a relationship for over 10 years. That is a proof point how customers trust us.
But I think it's best to hear from customers themselves. Can we play the video, please?
Adele, you, your team, you know very well How we work as an industry, but also as a company. So that expertise is much appreciated.
We had a close relationship, and That was the key issue when we were looking at the Corona app. Now it's one of the most The apps in the world to
really understand what are the pain points of Heineken. Secondly, 1st, to drive innovative thinking and bring experience from other industry, from other customers, hey, Heineken, maybe this is relevant for you. And last but not least, I think if we really want to accelerate the future, we need to find plans to, I call, invest, To invest together in the future in longer term arrangements, longer term partnerships like you and I, you and we have between our two companies And make sure that we both build the future.
I will never forget this.
I think this was a Sunday call with
the 2 ministers and Tim Huttges and
Same client from SAP. And you
know this willingness not only to jump in, but also to get the things moved Forward to speed it up together. And I really enjoyed it, and I still enjoy it. It's not I mean, there were I think let me put it in a different word. I think it's really an example how Infrastructure projects, how cooperation between the regulator and so the public side and the corporate side
So now let me talk about this new strategy that I keep alluding to, which is unevolved from where we were. There are 5 pillars to this new strategy. Number 1, you'll hear me say this over and over again, focus, Focus, focus, focus. Just like Tim says, digitize we are about focus right now. And the focus for us is to be the number one player in Germany and focused on DACH and other select countries around the world.
So we are not spreading ourselves in By covering every country in the continent, we are focusing where we want to play with the biggest focus in Germany and DACH as a region. That's number 1. Number 2, we want to be the leader and maintain our leaderships in 3 to 5 industries with deep industry trends And a portfolio of horizontal solutions that apply to any industry. Number 3, Historically, we have focused on the very large multinational companies and we will continue to do that. We will protect Our space and our base of these large international companies, but there is a massive opportunity in the market to focus on the €1,000,000,000 to €5,000,000,000 Euro companies that are struggling to digitize, struggling to drive themselves forward.
That is a big opportunity we have in TEPTO in the past. That's going to be a focus The 4th area is we are positioning ourselves as a strong local partner for our customers. The customers we work with, They have access to the entire management team. They have our mobile numbers. They can call us at any time and that gives them confidence That the one they're partnering with is not somebody who's sitting in the United States or in Asia somewhere.
It's somebody local In the countries where we play. And finally, sovereignty and security is a big differentiator that we bring to the marketplace. Given where we come from as a Germany, as a German headquartered company, we understand what data privacy means. We build it into our solutions. We understand what sovereignty means.
So then if you look on the left hand side, You can on the right hand side, your right hand side, you see how does this portfolio come together and you'll see simplification there. First, you see the industries that we focus on. Right now, we picked the 4 industry being automotive, public health and public transport. But of course, we have other emerging industries that we cover. And our portfolio now consists of 4 straightforward elements: advisory service, Advising clients on their digitization strategy.
This is based on our Datacon company, a fully owned subsidiary of T Systems, Driving the transformation agenda with the CEOs and the C level executives that then opens up the door for our cloud services, Hybrid multi cloud capabilities, our digital enabler capability with over 7,000 experts in writing software and digitizing and automating and process improvements and security being embedded in everything we do. That is our evolved portfolio. It's pretty straightforward. It's very clear where we need to focus. Now what I will do is I will run through each of these portfolios very, very quickly given the time constraint that we have.
And then, of course, get into how do we deliver over the next 4 years our financial and in terms of our financial commitments. So first, cloud services. Everybody knows the market is driving very hard into public cloud, but also hybrid clouds. There is speed of implementation that's happened over the last 18 months that we have not seen in years. And that will continue because cloud is the foundation where you digitize from.
It's not only public cloud, it's also private cloud, it's also hybrid clouds, it's edge solutions. And what we have created here is a platform that gives the clients the flexibility and the different platforms that In order to digitize. So we have partnership with public cloud companies. You've heard our partnership with AWS, with Microsoft, with Google. That is substantial in nature for us.
We have our own platforms that we deliver, OTC being one of our public cloud solutions as well and our private cloud solutions. We have our Edge Air that's been deployed in many campuses across the world, driving some mission critical real time compute and store environments in order to drive data ingestion and AI capabilities to improve the results for our clients. On top of these platforms, we provide migration services to help clients move, including, of course, after that cloud application services. This is a big business for us. And there, we have a period of time for the next 3 years where we're bleeding away some of the legacy like end user Services, where we still have about $150,000,000 to shut down.
We didn't shut everything down. We're bleeding off the contracts that we have. But also some of the classic classical IT businesses that we have, which makes it difficult for us to grow. On the other hand, our public cloud, our private cloud businesses are growing at faster than market rates, as we've demonstrated already over the last 3 years. If you think about our digital enabler, we talked about digitization.
We talked that this is a priority for majority of the companies. Here, we focused ourselves with 7,000 plus experts across the world To start with industry solutions and services, things like the connected back end of the car. For the Daimler customers here, Mercedes me, that is an application that T Systems has developed with Daimler That's deployed across millions and millions of cars. As an example, our police solutions, our hospital solutions, those are industry specific solutions that drive digitization. They're fueled by innovation in some of the core technologies like AI, like 5 gs, The 5 gs campus question that Claudio got is not just putting the network in, it's how do you then deploy applications that use that network.
Blockchain are some of the innovative areas that we drive. 3rd area is building platforms that we can repeat and scale, So we don't have to invent it every time. For example, big data platforms. So our data engineers don't have to think about what platform. They focus on what are the applications and how do I deploy them.
And finally, it's all about transforming our customers in the cloud landscapes. That is another big area for us as we go forward. If you look about embedded security, just last 2 weeks, we've heard about the news of a pipeline company in United States being held hostage With some of the hackers. That is not unique. Some of it makes it to the press, some of it doesn't.
But every company as they digitize, As they go into the cloud, they need security. And here we have a survey on the left hand side from the Citi CIO survey in 2020 that continues to say that IT security is going to be the biggest area where CIOs are going to be spending over the next several years. And we have a platform that actually takes you throughout the value chain of security, identifying, Protecting, detecting, responding and recovering. We have some of the world's most sophisticated SOCs deployed in strategic areas. We deal, Get ready.
With 80,000,000 attacks per day on our high path infrastructure that we deployed across the world, so we can learn the vectors We know we are coming. And our value proposition was having security in the network and IT is very unique in the marketplace. We can see the traffic coming through our networks and we can apply to the IT environments, which is very unique. Now I'm going to skip advisory Given the timing, and I'm going to go ahead and reinforce what I said earlier. We have a clear strategy and path To continue to build that, one of them of course is to deliver additional cost savings.
And what we're committing to you is Over the next planning period, we'll deliver another EUR 200,000,000 of IDC reductions. The next wave of IDC reduction is a little bit different than the past. We're now focusing deeper in our delivery, our nation, Process improvements, toolings, we select ServiceNow as our digitization workflow management system across the entire company. There's still some left in G and A and sales and our real estate. We could just realized, by the way, in the beginning of this year.
We are not going to We're going into a very different way of working where we have operation areas, development areas in big buildings where people come in and work together and we Tell them to have things to
do with your teams.
You can work for wherever you want. So we are committing 200,000,000 worth of savings over the next Planning period. And of course, all this kind of comes together to give us the new strategy. We our vision Is to be the most reliable IT service provider with best technology and industry expertise. And our mission is to help our clients on their digital journeys.
We are the European IT service leader In the markets where we choose to play. And we take our customers, we partner with them on a journey into modern, secure, Resilient digital environments with 3 differentiators: data sovereignty, Innovation in an open ecosystem and secure operational excellence. And our enablers are learning, continuous learning, continuous improvement. It's our people, Hashtag people make it happen and sustainability and diversity that Claudio already covered. We're all part of that plan that Claudio was talking about earlier.
That is our strategy as we go forward. Then what does it deliver then? This is our commitment for the next 4 years. 1, revenue, we are focusing to deliver slight growth. We have that Balance point we're reaching between our legacy and our new businesses, our growth businesses, where it's going to pass the 50% threshold, which should deliver us growth going forward.
2nd, EBITDA growth of 5%. 3rd, Our margin EBITDA will expand another two points in this planning period and EUR 200,000,000 in indirect costs as I described. Cash CapEx, we will keep stable. There is no plan to go back again to where we were after we reduced it from about $300,000,000 to about mid-200s And delivering cash contribution positive in the planning period. This is for the new T Systems.
The old T Systems, we did it. We demonstrated we could do it. This is now for the new 2 systems. So, Hannes, that's our plan. And I think I'm ready for Q and A now.
Great plan. Please join me for the Q and A over here. Thank you, Adel. Okay. Very good.
The times change and we change with them and that's the challenge, but it's amazing what has been Dan, and what has been created to take us forward here. So very I have the first question here from it's from Steve at Redburn. Steve?
Yes. Thanks I think we all probably thought 3 years ago you had one of the toughest jobs in DT. I think you probably still have one of the toughest jobs in DT and it seems like you're doing pretty well in Top market. Can you maybe just help us understand the trajectory of those financial metrics you set out? Because when you look at it, I guess that my sense is that as you burn off legacy and move into new collaborations on Clou, that's kind of a negative gross margin mix, but maybe not.
You declined 5% in Q1. So when do you think you can get to growth? And just give us a sense of I guess the 5% compound EBITDA is It's probably a bit back end loaded, maybe not, but that would be helpful as well. And then just finally, just on I guess your division is probably in the front line of COVID, what you've seen in the last 12 months, what you expect in the next 12, what your enterprise customers are telling you, how the business has changed through this process and what you're anticipating for the next 12 months in terms of challenges as As we come out of COVID, it would be really interesting to hear as well.
Very good. Well, Steve, so let me start kind of with the last part of your question and then I'll build it up backwards. So What are we seeing in terms of COVID dynamics? So first of all, we are seeing customers spending again, and we started to see that happening in towards the end of 2020, especially our industries where we are very concentrated. Let's say 60% of our business concentrated in automotive, Manufacturing, Industrial, Travel and Transportation.
So we've seen that come back. And as a matter of fact, one of our biggest disappointments over the last three years was our digital Solutions that grew strong from 2018 to 2019 then declined for us in 2020. And now in the 1st 4 months of the year, it's up Towards 10% growth. So we're seeing that come back. Now I wouldn't celebrate yet and say that the market has recovered.
I think it's still very measured. There are very clear plans to continue to spend. We started the projects. People are pushing forward with their digital agendas, if you will. But I'm still skeptical.
I think it will be a very gradual recovery and people will still prioritize quite heavily where they want to spend. So like security would be front and center, cloud movement would be front and center. But other areas like changing your SAP systems It's something that people are thinking more carefully about. So that's what we've seen. Now in terms of the metrics and how it comes, especially on the top line, Look, we've seen very good growth in the growth areas and you've seen that we've moved the needle to being almost 50% of our portfolio now made out of growth.
Every single element of our growth portfolio is making money. That was not the case in 2018. As a matter of fact, even public cloud at that point was losing quite significant amount of money. So over the last 3 years, we moved them Into making money without starting an investment in them. So as we go forward, the Grumys unit is accretive to us on a bottom line and top line.
That's why Getting 1% growth is super critical, right, because that does come with incremental EBITDA and incremental cash contribution, different than what it was in the past. And the margins for us, they differ. The Digital Solutions margin, for example, the work that We do with the governments, the work that we do with EU. You guys heard about the corona warn app that we did with SAP, the vaccination back ends that we've deployed across. These are good projects for us.
They generate reasonable return for us. And the issue for us is How do we expand the margin further by creating more repeatable assets? So the Corona Warn app that we built, we've used those assets To go build other areas like an enterprise tracking system for folks in manufacturing, right, who want to deploy A more closer proximity tracking on who's standing where. We use that platform. There's work going on around Vaccination sharing across the EU countries.
We reused a lot of the work that we've done in the past in order to do it. And we want to do that more and more. So not having to recreate everything, having more built up assets that we can build that we can reuse and that expands the margin going forward. So The tricky part for me is, can we sustain digital solutions growth that we have demonstrated in the 1st 4 months? If we can, Growth is a real achievable number.
If we can't, if the market changes and we're Fast enough in changing and shifting more and more towards this innovative platforms, then we will struggle
to show the growth going forward.
But I am optimistic in terms of The financials and how they come across with those growth profile.
Yes. And you've given EBITDA guidance, and you that this year will be stable and then that implies that 2022, 2023, 2024 will be better than stable.
Yes,
it's not back end loaded, Steve. So it's not all sitting in 2024, but it is we plan for gradual recovery as we go forward.
Okay. Well, thank you, Steve. And next is Polo. Hi, Polo again.
Yes. Hi, Zal. Hope you're keeping well. Thanks very much for the presentation. Just had a few different questions.
The first one is really just about your peer group. You made the point that you had a leading position in DAC, but who do you see as your main competitors? And are there any listed companies that you think resemble T 2nd question is really just a clarification on client concentration. You said that you're focused on multinationals, but can you maybe just give us Some sense in terms of what percentage of revenues your top 10 clients account for. And then my third question is really just a bigger picture question in terms of What you see as the benefits of T Systems being part of DT Group?
Okay. Paulo, good to see you, by the way. I hope you're doing well. I miss our workouts in London, but hope everything is all right. So Paula, first of all, it's a very good question on the peers, right?
So We are repositioning the company to not be compared to the likes of DXC, IBM, Accenture is the very large global players that have a different scale and go very much after this very large horizontal kind of place, right? We focused ourselves on more of the European leaders. We include Atos in that, of course, because they are very present in Europe, Capgemini, of course. But companies like Sopra, like Reply, right, like Indra, right, those are companies and since we're big in Spain, we do look at Indra as a key competitor. So that is who we compare ourselves to.
And by the way, when we look at the performance of these companies, the median performance in 2020 was about 1% revenue growth and minus 9% EBITDA growth, that unit that I just described with a few other company European companies. So we did actually better than competition on EBITDA side because our reported numbers were about minus 2%. But like Like if you normalize for all of the movements we had, it was flat year on year in EBITDA. But revenue wise, we were more because we were minus 1%, normalized with some of the areas. But those are the competitors that we look at going forward.
And we just Chase less of these big global deals and focus ourselves more on this local opportunity that we have, which are still very large companies. Like I said, DAX 30 we serve most of the DAX 30. We serve a big portion of the Fortune 500, but we serve them from a local perspective When they're buying local things. To answer your question on concentration, we haven't published these numbers everywhere. But I'll tell you this, our top 30 customers make up a big portion of our business, more than 50% of our business.
And this is where I see the opportunity, Polo, right? Because out of those top 30, a very small about 20% of them are the €1,000,000,000 to €5,000,000,000 revenue euro companies. And if you look at Germany alone or you look at DACH, The number of this 1,000,000,000 to 5,000,000,000 companies is much larger from a total market opportunity that the real big multinationals. So we are focusing ourselves with a different go to market and an approach to really get traction in that customer segment. And we have some examples already that we've done, right, in several customers.
And then I guess the last question you had, what is The benefit of T Systems being within the Deutsche Telekom Group. Well, look, it's the following. First, when you think of our entire portfolio DT and Uriki Systems. We are the only company in the world that can offer our customers a true end to end capability that covers connectivity, Cloud, digital and security. The security work that we keep talking about is Driven by T Systems.
And it's a company, our T SEC company serves everybody in Deutsche Telekom, right? So they although managed and consolidated into systems, it's a big Part of Deutsche Telekom. Examples of 5 gs deployment and private networks. We depend on our colleagues in the network side To deploy the 5 gs campus, but the use case in 5 gs campus is driven by key systems, I. E, the autonomous vehicles, I.
E. Big data, edge solutions, we deploy how do you actually capture. We do Daimler's tests. All of the Daimler's Heart condition test environments are managed by IT systems. So we have edge solutions in very harsh areas in the deserts and in North Pole where we capture data through edge solutions and having network expertise Brings a real good consolidated solution to the market.
But as I said, we've created this IT Services company, right? That's no longer confused kind of what we do, but still quite a bit of opportunity to leverage DT as a whole.
Excellent. Thank you, Adel, and thank you, Apollo, for the questions. And now we have A very short break before we move on to the grand finale and of Thorsten Langhaim on group development and Christian Ilek on the finance developments and then they will have a final Q and A also including Tim Hertzkills. So we have a short break. We reconvene at 1 p.
M. German Time, 12 p. GMT, and look forward to seeing you back. Thank you. Thanks, Adel.
So welcome back, everyone. Now it's the turn of Thorsten Lanheim. He leads our Group Development department. As I think most of you know, Torsten is our living legend. He will talk about how we have created value from the folio in recent years and not just in the United States.
And it's equally amazing how Thorsten and team have turned around the Dutch business. This is stuff for the textbooks. Let's hear Thorsten talk about how we will create even more value from our portfolio. So Thorsten, the stage is Yours, Thorsten?
All righty. I want to make it clear that I'm the only difference between a good week and this presentation. I look forward to this presentation because I get to beers. Beer number 1 is for this wearing this jacket, and the second beer is coming a little later. In any case, let me come to this wonderful picture.
Of course, yesterday, when I looked at the web page of the Capital Markets Day, I picked up that there was 1 in 2010. And in 2010, we had our wonderful leader, Tim, presenting on the topic efficiency and capital returns. We were the number 4 in the market behind Vodafone, Telefonica and Orange, our key competitors. And we had a burning platform in the U. S.
Now today, if you look at it, we all look different. We wear fancy jackets and we are the number 1 in the European marketplace. And if you see this, we are almost the size of Orange Telefonica and Vodafone. Why do I show you this? I show you this because we are investors, we are shareholders, we are a management team that is in for the long haul.
And that History is not always a good prediction for the future, but I think our track record is good, and you can trust us. If you look at my presentation, I think I want to leave 3 major things with you that you should remember. That's all. I think number 1, we have built the best telco portfolio in the sector, and this gives you earnings per year growth, free cash flow growth And strategic optionality. We have no burning platform like in 2010.
We will continue with what we have done over the last 10 years, Active portfolio management and exploiting strategic optionality. In the U. S, we want to retain control. In Europe, We will reduce strategic options for our towers and T Mobile Holland, and I will explain to you in a minute why. Number 3, We don't have a share price or Chief Share Price Officer.
We have 8. This management team has aligned interest with our shareholders. We won't shock you, and we want to build out our lead. You can trust us. This is my personal business card.
It's kind of interesting to look at Capital Markets Days and then see presentations. Everything can be interpreted as You have won. You have delivered your numbers. I'm just a simple number guy. And I'm just looking at the numbers and want to be judged on this.
We at Group Development are responsible for 2 things. And I think this, to a certain extent, is unique in the industry. Course number 1, We are responsible for the portfolio, for active portfolio management. I'm certainly not the most popular person in the group because We have trade off discussions. We have to allocate capital and not on a first comes, 1st serve basis, but on a risk adjusted return basis.
Second one, sometimes we run activities like in the past, Scout or Strato or over the last 3 years, towers And fixing T Mobile Holland or building up DTE Capital Partners from scratch. We are the department for, call it, value creation. And these are my most important metrics. Of course, you will find further operational KPIs in the booklet. But I'm just focusing on this, €44,000,000,000 since our last market Capital Markets Day in 2018 on the U.
S. For DT shareholders alone and the sum of the parts based on your best estimates of the value of T Mobile Holland and GD Towers creating €10,000,000,000 of value. How we've done that? You've seen on the right hand side. We have done in market consolidation because we believe in that.
We have also bolstered up assets for FFC capabilities like in Austria by acquiring UPC or just recently in Holland by teaming up with KKR and DT Care Partners for building out fiber. The result of our work, I think, is impressive. I still want to be humble because at the moment of your Great success. You sometimes overestimate the future. And this is the moment where you should be most vigilant.
However, Having said that, we have a fantastic portfolio standing on 2 major legs. Tmoo U. S. On the left hand side is our racehorse. 50% free cash flow growth, €18,000,000,000 of free cash flow in 2026.
I think a very smart analyst It's recognized mid May that this level of free cash flow is almost representing the whole free cash flow of the European sector. But on the other hand, we have, let's say, a stable and steady workhorse of for the digitization in Europe. This is our European business, which is has delivered a 3% EBITDA growth, and Christian will tell you in a minute how what we see in the future. It's number 1 in revenues. So now Dwelling on this, let me move on and give you a bit more detail on the 3 assets that we are kind of overlooking, T Mobile, U.
S, Holland and our towers. So this is a 10 year story. You cannot create value overnight, And it's not coming to you as a present. It was a long and sometimes difficult journey. For us, it's always important To get the right asset, but also at the right price, not just a deal that looks great at announcement day.
And it takes time.
Even when we
get a deal done, we are always looking ahead. And you have seen us negotiating a valuable call option on 45,000,000 shares in the U. S. As a subsequent step to putting these wonderful companies together in the U. S.
I very well remember the long journey that we had, starting with the AT and T break fee, the reverse merger into Mito Pre CS, Selling our tower business to fund our top line and uncarrier moves, identifying A fantastic management team that invented the Un carrier or sale of this at a time when it was fancy to think about media Content skills to differentiate in wireless or the 2016, 2017, 2018 Ross and Rachel episode between Tim and Masa about we get engaged, we don't get engaged, which finally lead to our transaction in 2018. You may remember what I said in 2018, we have a $70 stock with a free option on deal approval. This is a picture that I showed you at the Capital Markets Day in 2018, and we were celebrating. But to be honest, We were celebrating too early. In football, there's a saying, nachtemspiel is furhlimspiel or after the matches, before the match.
And what follows were Two tough years, tiring and frustrating at times. So let me look at this picture here. This is Tim and me outside the New York Courthouse after the cross examination by the state attorneys. It's fair to say that we looked a little bit like Weidolph and Stettler, frustrating and completely tired. To be honest, in 2018, we had no idea.
We needed 2 years with a lot of ups and downs to get to a deal approval. Of course, The heavy lifting has been done by the TEMU U. S. Management team, by John Mike Braxton and Dave Miller. But remedies are a tricky thing.
They need to be balanced, not killing the merger, but the merger benefits, but addressing the competitive concerns to get to deal approval. So far so good. I honestly believe that Judge Marrero took the right decision not only from my selfish position of shareholder value, but also from Consumer perspective. If you look at the recent C band auction and Verizon spending $45,000,000,000 on it, How on earth should we or Sprint have been able to compete as stand alone companies? Moreover, last week's refocusing and shedding of Some media assets by AT and T tells you a story about how competitive our merger is.
So since closing, another 12 months have passed. So what has happened since then? And I'm just focusing on the stuff that we as a shareholder were focusing on, not on what Mike clearly claims as Strong operational performance and improvements over the last 12 months. Number 1, we conducted a successful management transition from certainly one of the best Management team, if not in the U. S.
Alone, with John and Braxton leaving the firm, succeeded by Mike and Peter Oswaldic. We renegotiated, as you know, the exchange ratio, and we negotiated a valuable call option That we currently enjoy because it's at $101 while the stock is shortly below 140 We have been conservative enough on synergies. We've learned our lessons out of MetroPCS, and We'd like to outperform expectations. You've seen that we have increased synergy estimates and that we have Put Timo U. S.
In a position where even on a balance sheet basis, they can compete with the big guys. The target price has been increased over the last 12 months from $102 to $106 which gives us great hopes that everything is going to improve in the future even further. And looking at the share price, 3 years ago, I showed you that our stake value has improved from €9,000,000,000 to €32,000,000,000 Now we are at €76,000,000,000 Let me stress it a little bit and take a little bit of a pause. This is €67,000,000,000 value creation since 2013. That's a lot of value that has been created.
For us, it's €44,000,000,000 over the last 3 years. I'm not smart enough to judge, But has this been the most value creating transaction in Techoland? I'm asking, as Tim is always asking, for bring me awards. We started together with collecting the largest break fee in history. We enjoyed a 4% to 3% consolidation in Europe without Remedies and maybe the future will tell.
It may be too early to celebrate, but in 2 or 3 years, Hopefully, this has been seen as one of the better transactions. Even my old word of private equity, we would get a blouse, Two times money was on an unlevered return in 3 years is not too shabby. And also for us as a German company, it's a relief after the challenges that, for example, Bayer or Daimler experienced with U. S. M and A.
To be honest, it's not Given. And actually, people will know, most of the big ticket M and A transactions go wrong. And so far, This team in the U. S. And we as shareholders have delivered on a good story.
And why is that? The value comes from a strategic rationale that has been very compelling from the get go. The Cvent auction showed you how valuable the Sprint spectrum is, especially in the 5 gs world. We can build the best network far better And then we would ever do it organically and by ourselves. And if you look on the right hand side, the implicit valuation of Sprint Based on the exchange ratio, it was about €70,000,000,000 on an EV basis.
The synergies are now at about €70,000,000,000 The value of the spectrum that brings to the That brings to the that Sprint brings to the table based on the C band auction, implicit price is 64, and on top of it, DT shareholders got Customers, network and EBITDA. Now look forward. What does it mean for our shareholders? Tmall US is a sustainable, well positioned company. We believe there's a lot of further value creation in front of us.
Therefore, retaining control is a priority. And most importantly, it will certainly be financially attractive. Having said that, control in itself is not a value. However, we'd like to be invested in good assets. And as shareholders, we'd like to determine few things in order to evolve our Horizon track.
We want to bring our expertise to the table if it comes to allocation, M and A, capital structure and as we have demonstrated to you in the past, to pick the right team on the bus. There's plenty of optionality around our U. S. Stake, and we have time. There is no message today, want to increase to 50.1% tomorrow.
We have 3 years. And who knows what SoftBank may do when the lockup expires mid-twenty 24. If they are not selling their shares, we have a proxy forever. However, if they sell, we have a ROFR and we have a call option, so we could act earlier if we want to. And on top of the call option on the 101,000,000 shares, 45,000,000 comes at $101 I think That's a good position we are in.
Now look at the TIMU U. S. Cattle Markets Day in February. Based on their own projections, They outlined and indicated a share buyback of €60,000,000,000 between €23,000,000,000 and €25,000,000 This Gives us even more opportunity and choices, either enormous cash inflows if we keep our stake flat Increasing our stake if we are not selling anything in the share buyback. We will figure something out like we figured out how to fix the 20 16 burning platform T Mobile Holland.
So let me move to our Dutch friends. Let's look at Tim and Christian in 2017 when they try to figure out who assumes responsibility for T Mobile Wallet. Whoever plays tennis, and Christian is almost a pro on the tennis side, knows what happens when the ball comes through the middle Of the court, when you play doubles. Everybody is looking at each other and says, it's yours. And guess who ended up taking the T Mobile Hall and Board?
It won't be. So much to that. T Mobile Holland was certainly in intensive care in 2017, Very competitive 4 player market, multiple MVNOs, a converged duopoly of KPN And Vodafone Ziggo. And you may remember that at this moment in time in 2017, Vodafone was acquired by Ziggo And Zigu ditching us at the Altai. What did we do?
Drastic measures were required. First thing to do, Align management with value creation via Haas restructuring. What do I mean by that? We introduced an innovative equity incentive scheme. And on the back of it, we were able to hire 1 of the best management teams in the sector.
My friend, Tax office turnaround. A bit like John Legere and Mike Sievert in the U. S. Combined with an equity incentive scheme that in the U. S.
Was a reverse merger into me to PCS, aligning our interest. The rest was fairly simple. Radical cost takeout, Self funded network improvement, copying Tmoo U. S. Such as unlimited, and then we applied our M and A playbook to create value.
Market consolidation, tower separation and monetizing it, a recent JV on building out fiber with KKR, Exploiting remedies of the VodafoneZiggo merger by acquiring the small fixed line business, Twist. Results are good. Best network in the world, as Claudia said, market leadership assumed on B2C mobile, and we have the fastest growing B2B business in Holland. We more than doubled free cash flow since hitting the trough in 2018. And on top of it, We outperformed the competition, something that is always very important for Tim.
The numbers speak for itself. The EBITDA growth between 2018 2020 has been 15% on the headline side, including obviously the acquisitions. But even organically, it's a 5% 5.3% CAGR that stacks up very well in the European sector. Johann would look at this Johann Anzio, the former CEO of Yoigo and or in Switzerland, would look at this and say, Oh, Torsten, that looks like Real Madrid. And I say not sure.
It's Bayern Munich winning the 9th championship in a row. And here's my second beer. Johan promised me a beer for making a joke about Bayern. The problem I don't know, Jorg, about Bayer, but I know one about I just want to share this with you a second. A guy Throws a coin on the pitch at Saint Bernard Bio.
What is it? People are asking themselves, is that a missile on a player? Or is it a takeover bid, given the high debts Of Real Madrid. I don't know. In any case, I have my second beer.
So look at the value creation. In 2018, we had a bid on the table by a private equity firm roughly at about €2,000,000,000 If I look to your best And we obviously monetize our towers. We are now at about €6,000,000,000 The company is extremely well positioned. It has a Fantastic team. It's not only the CEO, it's 2,000 big fans That are working for T Mobile Holland in that market.
We have a pass to FMC via the fiber at JV. We will over deliver on the synergies on Tele2, but also on the SIMPLE acquisition that we recently done. And We will, as we said, initiate a strategic review of that asset. Let me say one thing. I don't like the word monetize.
What we want to do is crystallize, not monetize. This company deserves more than being monetized. It deserves to find a good partner for its next journey. The second asset that we have in group development is towers. I Called it our Sleeping Beauty in 2018.
And we spent a lot of time on it. We learned a lot. We did deals. We partnered That was the smartest cookies in the European sector, with the likes of Cellnex. And we We certainly have done a fairly good job on improving the towers also on an operational level.
How do we think about towers? Towers is a super attractive asset class. DFM gain specific is a gold standard. We have 9,000 poor ground based towers. This is 2x Vantage And 4 times American Towers.
We currently bid 1500 new sites per annum. And We have significant colocation upside as TDG is a single tenant on onethree of our towers Only. More carve outs to come. We are obviously working on Czech and Slovakia. And our operational performance has been fairly good.
People may not recognize it, but we have, Nodxellanex delivered the largest B2C program in Europe over the last 3 years. We have built 5,000 towers. We have 3rd parties with 25 percent revenue share on our towers. This is industry leading. And why are we there?
Because we focus on this since 2017. We haven't hired Bruno Jacob Feuerborn because he was a CTIO of For Deutsche Telekom for his technical skills. But everybody who knows Bruno knows that he's certainly one of the best CMOs that we have in the telco sector. And like in Holland, our cost focus has led us to achieve 60% EBITDA margins. On the other hand, also let me say this, we have an Fair advantage.
And our unfair advantage is, Tim, you cannot build 5,000 towers if the CEO of Deutsche Telekom doesn't give you a helping hand on this. So now look at this famous slide here. What can I say about this? I think it creates a lot of questions and excitement. But as you know us, we try and test a lot before we come to conclusions.
We have been Can I say that soul searching of how to retain the unique value creation that towers present? We saw this coming early As we experience a different market structure in the U. S, where no MNO owns the towers, we saw the high tower valuations, And we reviewed how to best participate. We looked at an IPO, partially monetizing our asset. We reviewed driving tower consolidation our But this hits obviously against leverage guardrails.
Moreover, there are clearly benefits of running an independent tower I think in due course, our patience will pay off. Multiples have related to U. S. Levels. And most importantly, MLA terms have moved Significantly, protecting us as the anchor tenant on pricing and allowing to preserve network leadership.
The market is moving into the final phase where Tier 1 operators may consider their tower operations. And Real Madrid, Zenix, Manchester City, Vodafone, PSG, Totem and Bayern Munich, us, as well as some Americans at the gate May play out the Champions League over the next 2 years. I think the time is right to review our options and use our asset as a Kingmaker asset and the European consolidation. We have 4 major criteria. We want to have a premium valuation for a premium portfolio.
We want to create balance sheet headroom. We want to have a favorable MLA. And ideally, we continue to be exposed to this asset class. However, let me say this, there is no artificial deadline, and we will deliver when we think the time is right. Let me move on to the final two slides.
Going back to 2018, if you recall, I said I want to be measured by Magenta My commitment is to increase asset value. TIMO US is a $70 stock with a free option if the deal is approved. And I showed you my Bundesliga, my league table, and you can guess where I'm going with this. This is us today. We have created a lot of value.
Tmoo U. S, Unprecedented transaction, massive value creation and I think a lot of further upside. Holland, Spectacular turnaround, more upside. DD Towers valuation doubled, MLA have improved. And our little company, DD Capital Partners, Generated €500,000,000 in capital gains, stellar IRRs, and based on that, is successful in getting further funding.
But we did not get everything right, and we learned from our failures. At BT, as I said at the last Capital Markets Day, we got our timing wrong. We thought hard about selling it, but like you, we saw some value. So we remain patient as holders. And as you can see in the U.
K, the stars
are aligning for
a much better performance of our investment in the U. K. Marketplace. That's my final slide. And here's my pitch to you.
My pitch is DT is a €20 plus Stock. I know it's difficult to trust me on this. In 2006, a long time ago, I was preparing a meeting between my former employer, Blackstone, And the German Finance Ministry, which was called the road to €20. Today, 15 years later, we are €17. So However, let me try at least to pitch my case.
On EPS growth alone, we will get there, but it may take some time. You know that we've traded between 13 to 15 times PE. And given the industry hiccups with cash flow Warnings, CapEx warnings, reverse of big acquisitions. I understand your attitude or the attitude by investors seeing Is believing. So how can we bridge the time gap?
As some of you have picked up, our sum of the parts does not stack up. The value of our stake in Tmoh U. S. And the value that analysts subscribe to DfMG and Tmoh Bahn Holland leaves Germany and Europe Valued almost for free. We don't need a hedge fund to tell us this.
This is another review a reason to review our ownership in those assets as Seeing is believing. Let me summarize my presentation. Please remember what I said upfront. There are three reasons why we are different. Number 1, we have an attractive portfolio.
It's well balanced, and it delivers Industry leading EPS growth. We have, based on our strong portfolio, strategic optionality, And we want to exploit this to bridge the time gap for share price appreciation. And finally, you can trust us as a team. We have aligned interest. We do care about share price and shareholder remuneration.
So I even made it now in 30 minutes In my time, I wore the jacket, I got 2 beers, and now I'm looking forward to the usual Literature on Friday afternoon, which is the Pateco summary of events in the Taco industry, Which we sometimes need because we are in this industry together and it needs sometimes a little bit of a funny moment given that it's a tricky one. It's unpredictable at times and a hard one for investors. Thank you very much. Have a great weekend.
Thank you, Thorsten. Thank you, Thorsten. And to also wrap up in time for a parcel call, so that's good. Now, you're right, seeing is believing, but you have shown us a lot, right? So it's I think it's a good time to start believing.
And the next guy who is going to show us a lot is Christian, our CFO, who holds it all together, and he will show us how this translates into numbers, and You better believe it, Krista.
We have really liked the presentation so far. I think we have shown very high level of ambition both on the commercial side, but also on the financial side. But now it's time to basically roll it up to consolidate the teles figures. And I will use the same approach as my colleagues have done, Have a quick review on the past 3.5 years and then give you the outlook for the coming years. So let's start with the messages.
Message number 1, I think we will prove the promise what we committed to at the Capital Markets Day in 2018. And Torsten used that phrase, Even on the critical metrics, not being CapEx or being cost reduction, you can trust us. We deliver what we trust. 2nd point is, if we're looking forward, We see a lot of growth. We're seeing top line growth.
We're seeing big service revenue growth. But when it comes to bottom line growth, that's even higher. And I will get to this when it comes to EPS or free cash flow growth. And it will happen across all segments. So we're not only relying on one second, it's Basically broadly adopted by all segments going forward.
3rd topic on cost. Look, we're in an industry where efficiency is at the center of our activities. And therefore, we announced another €1,200,000,000 cost reduction program for the European operations. And I think the U. S.
Team has Showing yesterday how they basically increased their efficiency by faster and accelerated synergy utilization. 1st topic on leverage. Look, after the introduction of IFRS 16, we changed the quarter to 2.25% to 2.75%. We stay in that. We will have a return back into the comfort zone by end of 2024.
And that delay, and I will get to this later on, It's purely explained by the shareholder remuneration program, which has been announced by the U. S, but also our clear ambition to achieve the majority in the U. S. Was 15.1%. On dividend and on shareholders, look, we are committed to stay a reliable Dividend player.
Our dividend policy will remain being determined by adjusted EPS. We keep the floor which we introduced in 2019 at €0.16 but we're moving away from EPS growth into a payout corridor of 40% to 60%. Given the financial plans, I think dividends will be progressive in the upcoming years. And finally, on the 6th point is We are reliable to debt holders. We have a very strong liquidity position and we are committed to have unrestricted access to credit markets.
So let's start in reviewing the past 3.5 years. And let me start with EBITDA guidance, IDC guidance and cash CapEx guidance. What you can see on the chart is we promised an adjusted EBITDA growth of 2% to 4%, and the prediction Until the end of the year is basically saying 4.4 percent on adjusted EBITDA. If you just focus on core EBITDA, it's even higher at 6.4 percent. So we bet that target.
On the business ex U. S, meaning on our operations in Europe, we basically guided at 2% to 3%. We will end up having a 3%. The 3% EBITDA growth is very much driven by the IDC reduction in the past 3 years. Going forward, we expect a more balanced contribution coming from net margin and cost reduction.
2nd point is on IDC reductions. You may recall as we reviewed at the Capital Markets Day in 2018 How we were at cost reductions, we missed on that point. So we renewed our commitment to another €1,500,000,000 net Cost reduction and indirect cost. And we're happy to say that we will beat that target by about €200,000,000 to 1.7 And on cash CapEx, that was also a highly debated figure. We said peak is going to be in 2018.
And from there onwards, we have a stable development going forward. And actually, I have to report back that holds true. So let me move to the IDC development and how it all breaks down. I said We're beating our target of €1,500,000,000 or about €200,000,000 And where does that come from? So first of all, €1,000,000,000 of the cost Reduction is coming from the German operations, meaning GIS and Germany.
Another €400,000,000 is coming from Europe. Dominik said yesterday, we achieved already €320,000,000 and that we'll continue to reduce costs in Europe by another almost €100,000,000 throughout the year. And €300,000,000 was delivered by T Systems. If you take a look on how you can assess This whether this is recurring costs or not recurring costs, I would like to basically draw your attention to that picture here on the FTE reduction in Germany and that excludes T Systems. We will reduce the headcount by 17,000 people over the course of 2017 to 2021.
And that reduction happens almost without any noise. It's a well established rhythm, which our people, our colleagues from HR are doing with the social partner. If you multiply these 17,000 people with average salary of 70,000 that gets you to 1,200,000,000 Gross savings only coming from personnel in Germany. 2nd point where you see that Cost is really going out of the system is real estate. We expect that we're going to reduce real estate costs by about €300,000,000 over the course of a time from 17 to 21.
That's coming from less space requirements. It's also coming from a renewal of our service provider contract, which we did with another company. Let's move over to free cash flow and EPS. So at the Capital Markets Day in 2018, we said We wanted to deliver greater €8,000,000,000 of free cash flow by end of 2021. We assume that the adjusted EPS is around €1,200,000 of stock.
And in case the merger is going to be approved, that was right after the signing, if you may recall this, obviously, there will be dilutive effects on both sides on free cash flow as well as on EPS over the course of 3 years. So what are we going to achieve? We're going to achieve Actually something which is at the upper level of the merger scenario. So we expect greater €8,000,000,000 free cash flow at the end of the year And we adopted our guidance last week. So 3.6% is coming from European operations, another 4.5% is coming from T Mobile U.
S. That compares to a 5.5 percent free cash flow in 2017. Same holds true for the EPS. Look, let me dwell on the free cash flow for a second. Look, what we predicted on the European business was actually €4,000,000,000 So we are falling a bit short on the free cash flow coming out of the European operations.
But this can be explained by non operational effects. So BT suspended the dividend, which accounts for €200,000,000 Obviously, since the merger has closed, we don't get kind of a margin from refinancing some of the T Mobile U. S. Loans and IFRS 16 also costed us €200,000,000 of EBIT of free cash flow in that equation. So adjusted EPS, you see we're developing from €0.90 to greater €1,100,000 I think that is both of those figures at the upper end of what we expect in our merger scenario.
So what we also did when it comes to dividend and total shareholder return, in 2018 at the Capital Good day. We changed the dividend policy. You may recall, historically, we were coming from future from free cash flow growth. We now basically took adjusted EPS as the key metric. We said dividend will orient itself on adjusted EPS growth, and we basically put in the floor of €0.50 Torsten just mentioned the roller coaster ride on the closing Process of Sprint.
And I recall back in November 2019, we were just about the federal states jury or discussion or trial. Sorry, I was looking for that. We had complete uncertainty on what's going to happen. Therefore, we decided to basically make a call on the dividend independent whether we get a positive or a negative result. And then we declared €0.60 and we announced a new floor of $0.60 Look, if you take a look at what we have delivered over the past years, we are a reliable dividend payer.
Our payout was in between $0.60 to $0.70 over the course of the past 3.5 years, and we will be a reliable dividend payer. If you combine our liability on the dividend payout with our operational outperformance, This gives you the outperformance on the total shareholder return. You see us with a 41% increase Since the last Capital Market Day, Tim was basically comparing us against Vodafone, Telefonica and Orange. This is a a comparison against the Eurostox Index and also we bet the DAX by factor 2. So what you see here right now Reliability and operational performance really pays off and is being appreciated.
So Let's go back let's go and move forward to leverage. So again, I'm Always comparing what we said in 2018 and where we're standing to now up until now. In 2018, we said, if we're getting back If we get the deal approved, we will basically need about 3 years to get back into the comfort zone of our leverage. Secondly, we said what is the comfort zone? It was pre IFRS 16, 2 to 2.5 And we basically committed to have a rating in between A- to BBB.
So in the meantime, quite a bit of things happened. First, we got the introduction of IFRS 16 and that basically led to an increase of their comfort zone by a quarter of a point. And to be honest, that was conservative because if you take a look at the current impact of the leasing liabilities, they're not 0.25 points, they're 0.4 points. So that was a very, very conservative perspective on this one. 2nd one is the merger closing was delayed until April 2020.
And what we didn't foresee at the Capital Markets Day is obviously the tower deal with American Towers and the C band auction. If you collapse everything together, We still, given our current financial plan, would be able to return back into the comfort zone by the end of 2023. So let's see how we're moving forward and that is basically the guidance. Look, we are confident about the future. Our performance in 2020 has carried on into the Q1.
We had a deliberate discussion what we expect from the remainder of the year. That led to that guidance increase of €200,000,000 in EBITDA and €200,000,000 in free cash flow. And let me repeat again, it's been equally split between a contribution in the U. S. And ex U.
S. So therefore, I think we have a very strong performance in the history and also are positive about the future. And let's finally get into the scorecard. And what you see on the scorecard is on the left hand side, you see our ambition. And on the middle column, you see our achievement spend of 2020.
And the traffic lights basically what we expect by the end of the year. I would call this almost green scorecard except for the shortfall in the free cash flow ex U. S. And I think we touched The dividend policy in 2019, these are the reasons why we basically put this in yellow. So, so much about the past, So much about the past performance.
Let's go and look forward. And let me get to my favorite chart. This is my favorite chart. What you're going to see is what is our prediction on free cash flow growth, adjusted EPS growth and ROCE growth over the upcoming years until end of 2024. Free cash flow is expected to grow from €6,300,000,000 at the end of 2020 To north of being €8,000,000,000 this year to be greater than €18,000,000,000 in 2024.
That translates to a CAGR of 30%. Obviously, the breakdown, if you've heard that yesterday, is very much driven by T Mobile U. S. By contributing more than €14,000,000,000 to this overall result. But also we see free cash flow Growth coming out of the European business.
What are the key drivers? Obviously, that is service revenue growth coming from the U. S, That synergy realization, but there are also 3 supporting arguments driving the free cash flow. 1 is obviously the shift from handset lease to EIP, which improves our operating working capital. And we will also expect CapEx to come down once the merger synergies are achieved and lower special factors over time.
From the U. S, from Europe, you can expect a constant support driven by EBITDA growth and IDC savings. So let me dwell on this a second and do a little bit of a fast forward. Let's assume we're on the year 2024 And we have achieved the majority with 50.1%. Then out of these 18,000,000,000 Half of the €14,000,000,000 belong to DT plus roughly out of the €4,000,000,000 if you exclude the minorities, another €3,500,000,000 from the European operations.
So €10,500,000,000 would be allocated to DT shareholders. This is more than €2 per share and an increase of more than 100%. The second one on adjusted EPS. Look, we expect that adjusted EPS is growing from €120,000,000 to greater than €175,000,000 And that translates to a 10% growth. There's going to be a small dip and this is basically between 2020 2021.
This is basically can be explained by the positive impact which we had on the fixed price option in 2020. What we're going to see is We're going to see a constant increase of EBITDA growth and a constant decrease of depreciation, which basically Gives you an indication that this growth is not back end loaded. It is coming with a steady growth starting from 2020 to onwards. So therefore, I think, again, this is a greater 175% prediction, and It's coming more in a linear curve rather than a back end loaded curve. 3rd one is ROCE.
So you've seen our ROCE being 4.6% end of 2020, and we expect it to grow at north of 6.5% in 'twenty four. Bear in mind, our ROCE definition is a very strict one. It's after tax. It does include all special factors. It does include all working capital changes on the NOA, all lease liabilities and all impairments.
So once we get there, we will have a significant distance Versus our average cost of capital, which is right now roundabout 4.5%. What is the key driver Between that ROCE, obviously, our Novod has significantly grown faster than the Noah. So let's move over to the U. S. And go quickly through this.
And you've seen that numbers already. The U. S. Is supposed to grow from €21,000,000,000 in EBITDA to 27% or 28%. That is basically a 7% growth.
And if you just exclude the handset leasing for a second, The core EBITDA were growth and at 10%. The cash CapEx is actually peaking in 2021. And you've heard Peter saying yesterday that he's expecting the €24,000,000,000 level, which is €8,000,000,000 to €9,000,000,000 already in So we talked about the massive free cash flow, which is coming from the U. S. So on CapEx, as I said, The peak is in 2021, and we will return back to normal levels starting from 'twenty three onwards.
Let's move over to the European business and take a look how this will evolve going forward. So what we're going to see in the European business Steady growth of EBITDA, growing from €14,000,000,000 in 2020 to €15,300,000,000 in 2024, And that relates basically to a 2% to 3% CAGR growth. What you also see is that this EBITDA growth is supporting our Larger CapEx envelope of €8,200,000,000 by 2024 in the European business, while it still allows to grow What we're also betting on is that the EBITDA development will be more balanced coming from net margin growth as well as cost reductions. So on cash flow, Guys, we always had that question we also had yesterday in the discussion. Look, we kept Our promise on the cash flow over the past 3 years.
And we will keep our promise also what we're indicating here. So we keep the €8,200,000,000 and you shouldn't be afraid about that we basically have to exceed this. And that will support The build out plan which Srini and Dominik presented yesterday both on the fiber and the 5 gs rollout side. So being committed to that envelope is important and we will apply, as we have done in the past year, very strict allocation policy on where and how we want to spend and where we and how we spend CapEx. Next topic is digitalization.
As you see on the chart, we have taken a fairly holistic view on the digitization within DT. And we're basically taking Taking a look at all relevant parts of the business, being in the front end or in the back end. And we're continuously optimizing and digitizing as we move forward. We have a program right now across the most leveraged activities being defined between Germany and Europe, we track it from 2020 to 'twenty four onwards, and we have a consistent review process And let me pick out two examples which have been mentioned yesterday by Claudia and Trina already. The first one is eSales share.
Obviously, you can take a look at eSales share. This is a great measure to reduce sales cost. We'll have no questions for intermediaries and so forth. But I don't
have
numerous reasons why we're doing digitalization. Cost reduction is one of them. But the other one is the e sales share as we go on and develop it further on will allow you to give you more personalized ideally a Person specific offer based on your needs. So digitization for me is always a combination of lowering cost, but also improve customer experience. And same holds true for the IP migration.
If I summarize the IP migration in one word, I would say you get a better product, You allow our service organization to better serve you and it allows us to reduce costs because we are reducing energy costs and reducing all platforms. I think that's the way how we're thinking about digitization, and we assess the EBITDA impact by €24,000,000 of more than €300,000,000 supporting our European businesses. But there is also, just, I would say, classical IDC cost reduction besides Digitalization. And the €1,200,000,000 additional cost reduction program I was alluding to Breaks down into the German segment by 700, Europe by another 300, and T Systems by another 200, which brings our indirect cost Down from €17,500,000,000 into €16,300,000,000 What are the key levers? The key levers is fairly technical to what we've done in the past.
So real estate will be a big one. So we have a range here of €100,000,000 to €200,000,000,000
I expect it to be at
the upper end. Claudio was talking about Retiring old IC systems and simplify the IT landscape, which is going to give you another €100,000,000 to €200,000,000 Obviously, we rely on the leverage effects, which we are achieving through our joint venture buy in, which gives you another €100,000,000 to €200,000,000 And the next one is obviously people oriented. We will have a very, very strong focus on Over structures and to make their life easier, but also to let FTEs go where we basically bet on a 500 to 600 impact and the restaurant is going over the other cost categories and saving discretionary costs. So all up, it's a €1,200,000,000 program. And I think It is, Jure.
It looks a little bit smaller than the 1.5, which we called out in 2018. But bear in mind, A, Our baseline is lower and B, we need a certain fraction of people for the network build out both on fiber and 5 gs, which allows us to basically reduce costs at a lower level. Let's move over to the finance strategy. Look, Tim often said, A strategy is a strategy is a strategy. And same holds true for our finance strategy framework.
We stay committed to be a reliable dividend payer And to have undisputed access to the debt markets. What does that mean on the equity side? Obviously, we're committed to be a dividend player and I To the details of the new policy in a minute. 2nd one, we got approval on the AGM to basically have the allowance until 'twenty 6 to buy our own shares back. Do I expect this to be very likely in the upcoming 2 to 3 years?
No, I don't. But still we have the opportunity. We talked about the ROCE. Our ambition is that the ROCE will be higher bucks starting on from 2022 onwards. And on the debt side, not a lot of changes.
We keep the comfort zone. We keep the equity ratio. And also on our liquidity reserve, we keep the policy That liquidity at least has to cover, 24 months of maturities. Let's move over to the dividend policy. So as I said, in 2018, we introduced adjusted EPS as a key metric, and we said it should orient the dividend payout should orient itself According to that growth, and we had a floor of €0.50 a share.
We basically moved that up to €0.60 We have paid out dividends in the vicinity of €0.60 to €0.70 over the past 4 years. And what we're going to do with the dividend policy going forward is that we're going to keep the EPS as the key metric, that we're going to keep the minimum payout to give you a guarantee on the payout, But we're moving away from EPS growth to a payout ratio. Given the EPS growth, which you have seen, which was about 10%. You can assume that this dividend will be accretive and grow over time. Let's move over to the debt side.
Again, what we said is we remain within our comfort zone, which is 2 point quarter to 2.75%. And we said at the Capital Markets Day, we will be back into the comfort zone after 3 years. This Assessment excluded basically two things: the shareholder remuneration in the U. S. And also our ambition to achieve 50.1%.
If we are doing this with the shareholder remuneration and the 50.1%, That will obviously slow down the deleveraging impact and therefore we will basically will be back in the comfort zone by end of 2024. The peak of the leverage is expected to be this year and then it will gradually go down. And bear in mind, if we are getting into the comfort zone in 2024, by the end of 2024, The share buyback in the U. S. Officially continues into 2025.
And you heard Peter saying, It will not stop after 2025 either. When it comes to our maturity profile, you see that Actually, the average maturities which you're going to have over the next 4 years is €3,600,000,000 So it's very balanced. You don't see any spikes. By the way, that holds true for the maturities also beyond 2024. We will receive another USD 4,700,000,000 coming out of the U.
S. And the first chunk is coming in, in 2022 with almost being half of it. And you see that we have a very strong liquidity position. And that liquidity position, which was €17,000,000,000 at the end of This year on average will be around €14,000,000,000 to €15,000,000,000 covers our maturities over the next 24 months really well. So before I basically wrap it up, Let me just talk a little bit about ESG.
And what is our contribution to ESG? It's basically round about 4 points. 1 is On procurement, we already have a policy in place that suppliers have to sign a strict supplier code of conduct, and this is going to be monitored on a regular basis. We will increase the importance of ESG as a criteria in the vendor selection process. We don't have a final number yet, but there's a clear commitment that we're going to do this.
And we're working jointly with External and internal resources on tracking where the Scope 3 emissions are being reduced within our landscape. Secondly is we will introduce sustainability linked bonds into our bond framework. Thirdly, we will become more Even more transparent on the CR reporting. Look, we received a lot of prices on the CR reporting, But I think there is reporting standards coming from TSFD and SASB, which we have to adhere to and which we're going to do. And the last one is even our DT Trust is geared toward ESG investing.
Actually, the pension fund started to do this in 2013, and the trust has moved into that direction in 2019. So after that short excursion, let me conclude in our finance strategy. Look, if you see that wheel, as I said, we will see A massive bottom line growth on free cash flow with a 30% growth on EPS with a 10% CAGR and also by an increased ROCE, which improves by another two points. That massive free cash flow growth will allow to Pay shareholder returns from T Mobile U. S.
Over the course of 2023 to 2025, which accounts in total for up to €60,000,000,000 Those planned shareholder buybacks will be a significant lever for us to achieve that 50%. But you also heard Thorsten saying we don't have to decide this tomorrow. We have time in order to get there, which allows us as DT to take part on the long term growth of T Mobile U. S. And as those shareholder returns will not stop after 2024, Will also allow us to faster deleverage our business in the years before 2024 or give you a higher return as a shareholder.
I was talking about the equity side and the dividend policy that we're moving to a payout ratio. I was also talking about the net debt the debt side, sorry. So let's wrap it up and take a look to the commitments which we put out there. So on Zed Chardan, can I have the next chart please? Can we move on with the chart, please?
No?
Okay.
Very good. And you presented it yesterday, Tim, so Okay. So if we don't it's coming? Come on. Let me just wrap it up.
On revenue growth, we're a bit pretty much at 1% to 2%, which is comparable to the Last Capital Markets Day. We also basically give a guidance out for service revenue growth, which is 3% to 4%, which is the new guidance. Adjusted EBITDA will be raised from 2% to 4% to 3.3% to 5%. Obviously, I talked about the free cash flow growth of 30% that relates to 10% in the past history. We have an accelerated EPS growth and accelerated ROCE growth And we're committed to stick with the cash CapEx guidance at €8,200,000,000 Same well is true that we are committed to reduce the IDC by €1,200,000,000 over the course of the period until end of 2024.
That is basically a commitment from the group side and I will finish here. Look, you can be rest assured that this team is committed to deliver as we have done it before. And I learned from Torsten, Whenever that ball is going through the middle, you're going to pick it up. Okay. Thank you.
Very good, Christian. And so that brings us to the final Q and A. And the Final Q and A will be with Christian, with Thorsten and with Tim. So I'll ask you to please join me here on this couch. And just maybe while they are coming, acceleration is the word.
You've heard it or how Srini called it yesterday, right? So it's about being reliable and so acceleration. Here we go. So let's see if we have some questions. I've seen quite a few guys already on the screen.
And we start with Akhil. Akhil, you can have your question, Liz.
Yes, of
course. Good afternoon. I've got one strategic one and then 2, hopefully, very quick Financial ones. I think in Thorsten's presentation, he talked through the fact that obviously one of the biggest Value creation events for Deutsche in the last 5, 6 years has obviously been T Mobile U. S.
And the decision to stay in that market and then merge with Sprint. I guess the question was, if we look going forward, do you see any other transformational strategic decisions on the horizon that you're thinking through In terms of the Deutsche Equity story, or do you think the story going forward is much more operationally driven instead? So that was the first strategic one. And then the 2 financial ones is, Christian, in your presentation, you talked about the target of the 6.5% break. I think in Srini's presentation, he talked about Germany going from 6% to 9%.
The U. S, I We'll have a very good return given the high cash generation. Can you maybe help us bridge why the total is only 6.5% if Germany is 9% and I And then the final bit was just on the dividend. I think there's no doubt the dividend growth is attractive and I think is very healthy. But I guess even at the high end, the dividend is about €4,000,000,000 dividend, whereas your guidance basis cash flow is €18,000,000,000 And that's about SEK 11,000,000,000 proportionate.
So it's about the 3rd of your cash flow generation. So just if you can maybe comment on how you think about that in terms of what the residual cash would probably be useful if we think about it and where priorities would be. Thanks a lot.
I guess, Who wants to start strategic question? The first one?
All right, Akhil. Look, 2 months ago, I would have said that for the next 5 years, this is all about operational improvement, performance, utilizing the best network in the 5 gs world and doing more of the same as in the past. We have the capacity. We have the speed. We have the quality and the network to exactly do what This fantastic team in the U.
S. Has done over the last 7 years. Over the last 2 months, so Verizon and AT and T have shared media assets. And I'm asking myself, as you may ask yourself, what does it mean for the future? Number 1, certainly, It's a kind of recognition how strong we have become.
So it's a focus on the wireless operations of these 2 big players in the U. S. Market, so they take us very, very seriously. And second, Which also underlines the value that we can bring to the table. The question lies on the table.
What is the next kind of effort To differentiate in this market, if it is not network, which is what we have. And there, we have learned a lot of lessons in the European marketplace. Convergence is one of the topics that may come up in the future. One of the reasons why we'd like to retain control Because if anything happens in the future, you want to have a juicy control premium for shareholders. Having said that, Akhil, I don't have a crystal ball.
We started in 2013 as a smallest and mobile operator. And at the end, we were able to consolidate. And This great team in the U. S. Is now challenging the number one position in the marketplace.
Who knows, maybe we get bigger. I have no answer on that. But certainly, it will be an interesting period of time. I think we will enjoy operational Sites and a wonderful network with a lot of capacity and then we'll see.
Look, on the ROCE, Akhil, first So we're predicting ROCE larger than 6.5%, not 0.6.5%. But I think, Yes, the number in Germany is right, but you also heard Dominique that the that she will continuously take time in order to move its ROCE up. And don't underestimate the investment lever coming from the U. S. We just added another €8,000,000,000 of spectrum.
There is a massive build out, so that burdens the Noah. So it will take some time until the U. S. Is actually progressing in these levels as well. So I think it's a composition of different pieces, but you're right.
The German figure is already at 6% and will further grow. On the Divi, look, the Divi, as I said, is you can expect that the Divi will increase given the EPS growth. And what we have consciously discussed in the team is that we wanted to have some flexibility on the DV payout. And this is why we came up with that payout ratio of 40% to 60%, by the way, which is well established in other industries as well, because we don't know whether we actually have The flexibility to pay out more, which is towards 60% or whether we have to stay strict because we haven't secured The 50.1% in the U. S.
Yet. And therefore, we basically came up with that solution. And the third one is, look, even if we Get to the 50.1 percent, we also have to think about our leverage. And we said that we are getting back into the comfort zone End of 2024. But again, this is another delay by year, and therefore, I think that was all factored into our dividend discussion.
It really is about the balance, isn't it? And we'll strike the right balance. And the other point I think that you rightly pointed out, it's nice to have these choices because your free cash flow per share is over €2 in a few years, right? So that's good. Next question is from George at DTE, please.
Thank you, Akhil.
Yes. Good afternoon, guys. A couple of questions for me, mostly focused on towers. The first question is to just get an understanding of how you are thinking about your tower by the crystallization. Price not being the determining factor and let's say similar price, would you have a preference for a clean exit or to still Maintain exposure in any deal you agree.
And my second question linked to that Is whether you believe in end market synergies within towers, particularly in Germany because there are some limitations perhaps That all exists in some of the other countries. And then my second question, again, on towers is a bit more of a Long term question about your overall network infrastructure. You spoke yesterday about Cloud Native Networks. Avin Shirin, you also mentioned the importance that telcos could play in edge cloud. So I'm just trying I understand whether you believe these investments are better touched down from a tower perspective or from an operator level and how that Could change your view of the strategic importance of towers versus the aircraft.
I think the first one is one for Thorsten.
I'll take the first one.
Yes. All right. We can't answer for the second one.
The preference for clean exit or domain exposure in a deal and whether we believe in market synergies. Look, first of all, we have learned a lot over the last 3 years. We've teamed up with Zenix for the Sunrise Towers in Switzerland. What did we learn? We learned a lot about that the Cellnex management team is certainly One of the smartest I have met in this sector.
2nd, how you make money in this game. And it's all about build to suit, especially for the number 3 and number 4 in the market. But this also becomes better suited for the number 1 or number 2 in the market in the future. 2nd, of course, in market consolidation of assets that you own is something that creates a lot of value for Tawaco. Cross border synergies are limited, as we all know, also in the tower sector.
But this is not to say that the management team With a smart headquarter and a very smart M and A head is able to add a lot of value. I think Zenix speaks For itself of how rolling up towers in different countries can create a lot of value for investors. 2nd, in terms of the preference, I don't have any preference, neither has this management right now. We are just saying we are open to a lot of options. We've looked at a lot of stuff.
We know what the pitfalls are and what the pros and cons are. And as Tim is always saying, let's attack and see, and I like that. I was thinking about just putting my cell phone number in front of the page and said we are now open for business. We are in a different Stayed in 2 or 3 years ago or over the last 2 3 years because we've recognized that the valuations have moved to a place where it makes sense for us to engage And most importantly, where the MLA structures provide enough protection for us to further differentiate. And that is a key A thing for us because we also see the tower model in the U.
S. Keep in mind, we sold our towers or part of our towers in 2013 to Krogn Castle. And we know how it is to deal with tower companies in the U. S. We know what we have to avoid.
And therefore, We are open for business now, and there will be yes, I'm excited to what may happen over the next, call it, 1.5 to 2 years until the next Capital Markets Day.
I think the next one is for you. I guess it plays to networks of networks and how we orchestrate that. Well, I think it does so let me answer it because that's because I think it is in the context of what Tim presented yesterday, the networks of networks. We have the capability to orchestrate this and we will not always be the owner of this network in every place, but we'll put it together in the best possible way for our customers. So I think that I yes.
I think What we wanted to say and I do want to repeat what I said and what Claudio had said as well, the idea is This ecosystem is changing. And in this changing ecosystem, we should be adaptive, Adaptive to all the developments which we see. And we should not do that naively, but we should do it. And I know a lot of Partners are watching the Capital Markets Day. They sent me notes.
And being the Microsoft people, being let's say, my friends at Cisco and other companies. So these people have They're not competitors, but sometimes they're even not friends. So we have to find the right doses on partnering with them that we create win win situations in this digital ecosystem. It's a very complex one, but we have opened our doors to partnerships. And by the way, that's not something new.
Remember, the first Capital Markets Day was about win with partners. And now I think we've grown up in this ecosystem. And when it comes to the architecture of our networks, when it comes to the softwareization of all the Functionalities which we talked, both on the consumer and use case side, but as well, from the way how we organize our businesses, We have to embrace them. And that is what we're doing and how we then share the trough, how we share then the value chain. That is something which we have to then negotiate.
But I would say the last years taught me That's a win win and that we were more winning from these partnerships than losing.
Great. Excellent. Thank you, Tim. And the next question then is from Josh at Exane. Josh?
Thanks, guys. A few quick ones, hopefully, from my side. First one
is just following up on
the towers question. So What percentage of your German towers today do you consider to be genuinely strategic and differentiating that you might want to retain some kind of reserve control over in any future tower Structure. The second one is a slightly annoying one about cash conversion. So one of the things we often get asked about with BT is What's the real post everything else free cash flow? And maybe just if you could give us direction of how you think things like Finance leases, vendor financing, etcetera, would trend over the next few years as well would be helpful.
And then the final question is just regarding your Comfort range on leverage, because I think a lot of the last two days has been talking about why DT, partly through its European operations, but also U. S, is Different kind of telco given its higher growth in exposure in assets. So the question is, what would you need to see happen in your Performance to raise your comfort level or comfort range for leverage? And at what point do you think you could say this is a business that should be levered more at 2.5 to 3 times in the 2.2 to 2.7 you talked about today. Thanks.
Can I start with the last one? We will not change the corridor, to be very clear. And the reason being is it forces discipline into the organization. I'd rather prefer to tell you I'm out of the comfort zone and having that deliberate discussion with my peer and left Colleagues on an ongoing basis then basically lift up the comfort zone. I think and mathematically, you're right, Josh, Because you know that the lease impact is about 0.4 points right now and you could argue.
But for me, it's a disciplinary Activity to keep the comfort zone where it is and then I'd rather prefer to delay returning back into the comfort zone. 2nd point is, if you take a look at the share buybacks, which are coming from the U. S, they will not stop in 'twenty four, right? There's an official program going into 'twenty five. So that will help us to deleverage and it will continue the years beyond that.
So on the leverage, no change And keep the discipline. And keep us honest on this one.
Boston on the towers.
On the towers, yes, just one sentence here on debt. I think what is one thing that is kind of noteworthy is that Leverage is good for equity holders as long as your EBITDA and free cash flow grows. And obviously, we are also in a different environment, yes, Then 10 years ago where interest rates were much higher than today. You see that we are also as a team discussing these kind of We feel much more relaxed today than maybe 5 years ago when the leverage ratio was lower. But this is not to negate what Christian was Just saying, just an observation.
2nd one on towers. Yes, of course, there are some strategic towers. I cannot give you a kind of sense. Maybe it's 5%, maybe it's 10%. It's much less than you think, because it's no longer a coverage game.
In Germany, we still Have an advantage there, but given the license requirements, also the other guys have to move up and we are open for business on co location. But we have some juicy rooftops that in any case we cannot share by the way, but these are differentiating things So the old discussions that you had in the past about, oh, how many strategic sites you have is much less than a lot of people and thinking.
Okay. Let me just dwell on the free cash flow. So Our clear ambition is to make the free cash flow as healthy as possible. I'll give you an indication. Recall back in Q1 2021, we basically have reverse factoring and we're trying to do this on an ongoing basis.
Secondly, also the vendor financing in the U. S. Has increased, while at the same time free cash flow is increasing. So from a percentage point of view, I think the dilution is coming down as well. On the lease trends, look, in the European business, there may be some slight increases because we have to build out into 5 gs, But it's not massive.
I think the biggest question that was asked yesterday as well is obviously the renewal of The leasing contract with Crown Castle and SBG in the U. S, which we haven't mastered yet. And I would say once we're through this one, I think we shouldn't expect a significant increase on the lease trends going forward because we struck deals which are 15 years long. So they will be basically there will be no new deals coming soon.
Yes. So no vendor financing and T Mobile has a constant level of finance leases that you know about, okay? And that's it. And otherwise, it's squeaky clean. So with that, we move on, thank you, Josh, to Jacob at Credit Suisse.
Thanks for taking the questions. So I had a few, hopefully, fairly straightforward questions. Firstly, I mean, you said you think DT is a sort of €20 plus stock, But also you won't buy back stock in the next 2 or 3 years. Can you just help us understand why don't you want to buy back stock? I appreciate you're growing the dividend, But why do buybacks make sense for TMS but not for DT?
Secondly, in Torsten's slides, you showed that you rejected 2 mergers with a European Tower Co and a fifty-fifty JV with a European Tower Co. Was that purely about price? Or can you maybe just sort of help us understand the rationales behind those decisions just to help understand How you think about this sort of concept of monetizing tower co valuation? And then just finally, I mean, it sort of sounds like you've become more flexible around And your ownership of mobile assets and also on the fixed line side where, as Srini mentioned yesterday, you expect to own 60% to 70% of the fiber assets long term. So I guess the question is, could you look at broader monetization of fixed line Down the road, could the German fiber networks sit in group development in a few years?
I'm just sort of interested in how you think about that. Thank you.
Micah, Jacob, a very, very good question, and I couldn't agree more on the buyback topic. However, you also know our leverage constraints and you know our priority of retaining control in the U. S. So first comes first and then comes second. So much to that, but I certainly it's not lost on me And on us here as a team what you are saying.
On the, let's say, tower discussions, let me keep this private because we signed NDAs. But I indicated to you before that MLA terms, Price, premiers, lease liabilities, they may hit you, which is kind of a very odd Sing here in European Accounting, something that I don't understand. I'm coming from a cash Would and not from an accounting word. It's lost on me how you and why you have to capitalize OpEx at these low NPVs at the least low discount rates and then all the nice benefits of a deal are gone. But I recognize that 2 things have moved a lot, especially last Yes, when the First American came to Europe and then the subsequent acquisition in the France market by Sanx that terms have improved significantly.
So just take this It's my answer on your very good questions.
Let me add 2 topics. The first one, by the way, I'm totally tossed and with you, why not doing earnings per share buybacks on the stock? My first observation in this regard is there is a difference between the U. S. And Europe when it comes to buybacks.
In the European environment, I always See it a little bit like a lack of strategy if somebody is doing a buyback. And now I would not say that we have a lack of strategy, but I think we have a lack of communication and conviction. And therefore, that we are holding a 9 hours Capital Markets Day that we're constantly on the road that we are trying to convince you guys on Deutsche Telekom stock. This is, let's say, our answer on this one. So Then rather buying back our stocks, we are trying to attract investors into our stocks.
So that's, I think, my approach on this one. And dividend is a more for me a more sustainable instrument, which shows our conviction into the future prospects and rather doing 1 or 2 times share buyback on our stocks to just be Happy with the price we see. But the undervaluation is for us is And we have a lot of bets about that one in our team here. My second thing is about ownership on assets. I think we are in principle an infrastructure company and therefore, we should own the network.
We are not a service provider. We are not a Servco. We are an infrastructure company and a netco. And therefore, our ownership on fixed and mobile gives us as well the credibility on this business. We have to run the networks.
We have to build and run the infrastructure. And by the way, I even believe we do it better than a lot of other peoples are doing it. So therefore, the majority of our infrastructure should be under our control. This gives us a much more flexibility even from the technical solutions which we are providing. Nevertheless, If you can't fight the dragon, ride the dragon.
Our balance sheet is stretched. So therefore, you know and our capacities as well. And therefore, we cannot go for 100%, impossible. Nobody is able to do so. And if you can't fight it, then you have to ride it.
And therefore, Our logical step is then to say, okay, guys, there are others who have maybe the same issue of utilization, their infrastructure. There are others who have good technologies in areas where we have weaknesses. Let's partner. Let's create a win win. It's coming back to my earlier point that we are open to this one.
And this gives us much more credibility. It's, by the way, good for the consumers because The extension of the infrastructure is broader and the monetization of that infrastructure as well. So therefore, I think this is the change in our thinking. And by the way, you're tapping a very important point because our network guys, Our technology people, they love to own it 100%. They love to control the whole value chain.
But that is not how the world It's developing, and therefore, we have changed this paradigm successfully, and I think there's more to come.
I would add one additional point when it comes to separation complexity. We looked at this quite intensively a couple of years ago. And it's not like that you open up a zipper and the left hand side is the go to market organization and the right hand side is your network. It's a complex undertaking to really separate out a fixed network out of an integrated telco and take a look what has happened in New Zealand, not through that. So it's very it's a very complex project with questionable financial results, whether this makes sense.
Yes. And if I may add one thing, I think Sweeny talked about this yesterday. It's actually there's a lot of execution and capability, opportunity and optionality in how you run the value chain and fixed line networks, right? I mean, ideally, you can let others build some stuff that you really don't want to build and you get onto the chain of the value where the money is. And then you used joint ventures and so on.
So it's a whole range of opportunities and models that you have to orchestrate. And I think that's where a lot of the value creation will be and doing this in the right way in Germany in particular. So next thanks, Jacob. And the next one is from Robert, Deutsche Bank. Robert, here you go.
Yes. Hi, thank you very much. I loved the vision and drama over the last 2 days. It's been the best box set I have seen all month. Going back to the rump discount, if I might.
Either investors don't like the U. S, which is clearly not true, Well, they think the ex U. S. Part is worse than other telcos, which cannot be true, which leaves the interface, which is the problem, and relates to intergroup cash flows and how cash gets Back to shareholders. One issue causing confusion is the buyback versus the dividend from TMOS.
Are they fully fungible And make no difference to you guys in your thinking and how you take benefits. I'd like a comment on that. And going back to the payout ratio, Having a payout of earnings is entirely logical as a proportionate measure. But compared to non telcos, Deutsche Telekom has a high D and A versus CapEx, the dividend did get cut and interest rates are rising. Yet it seems you are still cautious, especially at the low end.
So from the previous comments, it seems that it is the leverage target. So if you monetize some of your portfolio, will that directly release cash The distribution and we can expect the payout to move up the range. Thank you.
Thanks, Larsen. So
let me start with the payout ratio. Look, first of all, yes, we're not Paying at the same level relative to other competitors, but other competitors don't have the same business profile as we have. And we're growing much faster by the way across the Atlantic meaning the U. S. And the next U.
S. And I think that should be Consider as well. I'm not sure whether we're cautious. So but on the EPS, let me remind you, we said It's greater 175,000,000 and greater 175,000,000 means that the full potential is above that level which we're communicating right now. And what was the question with the DT has a high D and A on CapEx?
Can you help me out on this one, Robert?
Yes. That was the point around the payout. But basically, your cash flow is growing far, far faster than your earnings is the main point. But I think you've My other question is about the getting cash back from TMOS. Does it matter whether you get it through buybacks or dividends?
Because investors kind of I think it somehow does. But is it fungible?
Fully fungible. It is fully fungible. Actually, from a tax perspective, A share buyback is better than a dividend. So and you have heard the U. S.
Team saying we perceive ourselves as a growth company. Therefore, we prefer share buybacks way over the dividend. So I think that was a very clear message.
But they gave a they also said there's buybacks for 3 years and it won't stop in 2025. So it's as far as we are concerned, it's about as reliable as a dividend. Okay. Hope that's a good answer. And let's move on to thanks, Robert, to Polo.
Again, here you go, Bruno.
Yes. Hi. Thanks for taking the questions. So we've got 3 quick ones hopefully. The first one is really just about German politics And also the EU Recovery Funds.
So most of the German political parties have published their election manifestos and the Green Party, SDP, FDP all seem to be proposing increased investments in broadband infrastructure. So how do you think this will impact The evolution of the German broadband market and could further government subsidies lower German CapEx for DT going forward? And also how should we think about the impact of the EU recovery fund on the German communications market? Second question is really just about German headcount because Christian had a slide showing 85,000 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es in the German region, but with Digitalization and also an acceleration in the number of people retiring, how should we think about German headcount in the longer term? And my final question is really just about risks and opportunities because it's clear that the main message from the Capital Markets Day is about Accelerating growth.
But if you look at your 2024 objectives, what is the one area in Squestive View term, what's the one area that you're most Excited about or what do you see as the biggest opportunity? Similarly, what do you see as the main risk to achieving your targets?
Polo, first thing, by the way, it's interesting that We had only one question to regulation so far from doing all these 9 hours. And that shows me that We all perceive the regulation is relaxing and it's getting better. And when I talk for Germany and specific on the regulation side, And I was preparing myself here for the session. I was thinking about what is good and what is bad and what is open. And What is good is the new telecommunication law is opening up better ways Of building infrastructure in Germany.
It is an ex ante regulation. It supported all our wholesale deals, which we had with the partners. The need in cost in Trevi Lake has fallen. Okay, you can complain that it takes a few years too long, but in principle, it is decided. We had not an decrease of I would say prices, the opposite is taking place and the regulation in principle is supporting this.
The national roaming It's not over yet, but it is still there with regard to Janss and Heinz, but the likelihood that it is legally enforced is not there. So In principle, I would say, the regulator in Europe and in Germany are very much on a track to ease the situation than worsen the situation, which is a good signal. On top of that, Europe has €750,000,000,000 funds available for the recovery And Germany, on top of that €140,000,000,000 only for Germany, which are standing there. We have reacted on that one. We have built an own An organizational unit analyzing this different parts here and applying to this one appropriately.
Honestly, I think the biggest problem is not the money. The biggest problem is the application process. And therefore, I have even personally initiated at the BDE, which is the industrial association in Germany, an independent support that private partnerships getting built that we find methods that this money is getting into the system quickly. In this organization unit, we found out that something like 25% of the whole money It's relevant for us as Deutsche Telekom, including to systems business. And for this money, we are now Organizing ourselves to apply for that one.
To give you a few relevant example, schooling and the digitization of schools, I'm not only talking about fiber, I'm talking as well about the cloud, talking about the running of the system is one of the elements. 2nd, we have seen all the things around the Corona One app. We have seen the elements about the Change server, Deutsche Telekom is the one providing the global vaccine Passport. We have seen initiatives about more subsidization for rural areas for connectivity. By the way, they're not part of the German program because the money was available already before that.
You should add them on top of that one. We have a discussion about Gaia X. Money is available for that one. We have money for Open RAN. Deutsche Telekom with partners has opened up in Berlin and own lap for Open RAN where in the field people can test it.
So the money is flowing already today. We are applying in a very professional manner to this one. Our involvement, and you see that I can talk an hour for that one, is high. I'm personally involved into a lot of, let's say, debates on how to allocate best the business that digitization is leapfrogging in Germany. And that is the way going forward.
We will see that over the next years now, how it comes to into the system and the application is the challenge which we see today.
Okay. Let me pick up on the headcount question, Paolo. So first of all, This is not a new process. We're reducing headcount in Germany since many, many years in the vicinity of 3% to 5%. It depends on the year on the programs which are running.
I think the basis for this, as I mentioned this in my presentation, is a very productive Interaction between our HR organization and the social partner, we have a well established process. We don't make this with a lot of noise. It's kind of a continuous decline of the headcount. So do we see acceleration? I said in my IDC program, Look, this is a lower ambition relative to the 1.5, the 1.2, and that is also due to the accelerated efforts which we're doing on fiber.
So we are To a certain degree, restrained of letting people go because we're putting mere capacity demand into the system in order to accelerate the fiber build out. And on the retirements, the retirements, to be honest, we can wait another Couple of years. I think they're kicking in, in 20 25, 20 26. So we don't have the luxury like the French guys had that they Could let people go because of retirements. So it will take quite a bit of time until we get to this.
But in the middle of 20th, then we're going to The increase of natural levers.
Great. I think I'm maybe a veteran already in this scene here and especially when it goes to the city. There is this narrative that When you think about Germany, headcount reduction is impossible. We are anyhow not cost disciplined because we always want high quality and we are not able to reduce headcount. And if you see the constant decrease in our organization, If you see that we have over delivered on the €1,500,000,000 cost savings, which we have promised, I think this narrative is wrong.
And You have to do it in a right way. It doesn't make sense to make that very loud and noisy and announce big programs. I think in Germany, The culture is to do that in a kind of competition and joint effort with our Works Council. And there's no way that this is stopping. And with Srini on Germany, you have a no bullshitter sitting on there, That's business.
And he has started, by the way, in alliance with the unions to think about how many SG and A, How many quality assurance, how many administrative people do we need in our organization? And that is even a new A push which came to the organization from that angle. So I think when it comes to our 3% to 5% EBITDA, you know that there is more cost discipline in every element needed
to achieve it. Look, on the opportunities and risks, our plan is prudent and we discussed it back and forth. And if you take a look, I see currently More opportunities than I'm seeing risk to be honest because I think we have the worst times of COVID probably behind us in the next Couple of months and people are becoming more optimistic. There is a significant backlog of digitization efforts being in the public sector, being with Small companies and people actually value quality, which should help us in the proposition which we're providing to customers. We have a fairly rational market environment and I hope That it continues to be.
Obviously, it cannot influence 100%. But what we've seen in the past actually gives me confidence that people are staying disciplined also in not becoming lunatics on pricing or something like this. So right now, I think I'm hopeful Full and confident that we actually achieved those numbers mid term and short term.
Excellent. And there are some greater signs in front of some of the targets. Okay. Thank you, Paolo. And next is Andrew.
Andrew.
Everyone, thanks for the last Kind of 24 hours of answers. That answers a lot of our questions. I had one on Thorsten's Slide 22, which is one we've all been struggling with, what gets DT to EUR 20 plus stock and specifically the team has valuation in DT. So you guys obviously read analyst reports and speak to investors and loads of people have highlighted that the DT European stub is Cheap. Lots of people have highlighted it, but it hasn't really made any difference.
Maybe DT Europe's Super cheap. What it looks like is that DT investors aren't paying the right value to TMUS within the DT share price Or at least not the same value as Timas investors are paying for the Timas listing. So the question is, Why do you think this valuation discount exists? And outside of buybacks, is there anything you can do to make sure the DT shares Better reflect the value you highlighted in TMUS and for DT overall. Great if you could also explain what you meant by seeing is believing.
Thank you.
Thanks, Andrew. I know that you have written about this and quite smartly picked this up as well. It's a difficult question to answer, but we have seen this game being played out in many different sectors and also in our sector. For example, SoftBank and its stake in Alibaba not fully reflected in the SoftBank valuation. Sometimes you have then to License value, which we try to achieve by highlighting the value of our towers and of our Dutch operations.
But I think if it comes to the U. S, People are just waiting as an investor in Deutsche Telekom that they see the benefit of the value in the U. S. In the dividend And that is what means seeing is believing. I think if we hit the €1.75 in EPS, we can pay a much higher dividend And then the bots will buy.
So I think it's a timing question. Keep in mind that over the last 5 years, Significantly in value, but other than seeing it in the Capital Markets Day at the Capital Markets As a valuation, the DT investor, the DT shareholder hadn't had the benefit of a higher dividend or cash coming out of This investment. So I think this is a timing issue. We want to bridge this timing issue because it also gives us, yes, A greater pleasure to work and more optionality in the future if our share price is higher. And therefore, as I said, it's not lost on me That some people are arguing, hey, why don't you buy back DT stock at this valuation if you are convinced in this?
By the way, we had a similar A few years ago when DT's TIMO US stock was at 45 and some people internally were arguing, hey, why don't we sell some TEMU U. S. Stock in order to fund some stuff or buy back DT shares. And I told these people the same thing that I tell them today. We have a leverage ratio that we want to bring down.
2nd, we have a priority because it is Financially very attractive in our view to be invested in the U. S. And we don't want to get anywhere near kind of Trap where DT shareholders are not getting the benefits of the cash that is being generated in the U. S. It's not to say that we will not support in kind of creative ways that Mike and the team comes up with investments in the U.
S. But I think to cut a long story short, seeing is believing we need to see a higher dividend because that's the benefit that the DT shareholder wants to see. And we want to help a little bit by crystallizing that just look at it, Germany And this wonderful European operation, which is growth, which is EBITDA margins and its cash conversion, if you really look at this, sometimes I think, oh, hopefully, We can list Europe for a second, yes, and put a value on this as well, then the market would better Understand the benefit of having these assets not fully reflected in the share price.
Okay. If Thorsten will be the CEO, I would be the Chairman of 20 companies, I can tell you, because everything would be in the market. Europe in the market, the systems in the market, Deutsche Telekom Germany in the market, U. S. In the market, our MR portfolio here.
Anyhow, that's a funny remark. Look, I can tell you 2 things. The first one, we have a lot of internal bets about the $20 And there are bets like The moment we get it, we make a big donation to a good purpose. Thorsten was even dancing on the table in our Supervisory Board promising the $20 So Andrew, so that was a big commitment that was sitting under the table. And then we had the discussion as well internally on what can we do and what is the reason that we are not there yet.
And one of the observation is that a lot of the machines are buying our stock. And it's you are looking in it and I think you're spot on. I saw your report recently And I think you got the points and you understand our business. The machines, they're looking on different criteria. And one of the reasons that we are focusing on earnings per shares seriously is that we believe that we can trigger additional demand on our stock by focusing on understanding better what machines are doing.
And that is one of the reasons that we are changing the paradigm here a bit. So this is one of the elements. It's not about our fundamentals. It's not about the future prospects of our business that we are Doubting, I think it's the way of communicating and addressing the market. The second thing is, and I have to say that, because I got some harsh mail from one of our competitors about my presentation where he said, look, it's Totally unfair that you compare your total shareholder return with ours.
And you show yours growing while mine is Shrinking. This is unfair. This is criticizing my work or whatsoever. I can tell you I was not criticizing the work of the European peers. And I know how tough the work is for Orange Vodafone and how great they're doing, by the way.
The only issue is, if you're living Europe alone, We are in this narrative, Europe is a loss, Ken. And nobody gives a dollar on Europe in the telecommunications space, which has Accelerated the issue. I think we are in Europe, all telcos, the good ones are undervalued in the way how they're doing. And that was I think the story. If you cannot win in Europe, then you have to find ways and you have to manage with the situation.
And that is I think what we did, changing the portfolio, focusing on the U. S, investing heavily into that business, Having the merger on hand, doing some structural changes, this is I think the message we did. We did okay in this regard, but we think we can do significantly better. We believe we are €100,000,000,000 stock prospectively, and therefore, that's what you're fine about. The third answer, Andrew, When we run out of this Capital Markets Day, and we were not allowed to do that earlier, this team is buying a big pile of stock.
This is another commitment because we believe in our shares. We were not able to do this beforehand because of the insider information we had, but we will do that right after that event. And please follow-up on that one Monday. So it has even put your money where your mouth is. I'm heavy invested in the stock, double digit.
And I believe it's coming. It's a question of time that we see that. And I feel like an entrepreneur in that company, and we have to move on. Honestly, I believe we will see it. It's only a question of time.
Thanks, Tim. And just to repeat some of the numbers, greater 175 in 2024. Christian said It's going to go there in a basically straight line. So next year, earnings are up. Over Gross free cash flow per share proportionate free cash flow per share in 2024.
It's also not it's not a J curve. It's a straight line. So that's what we'll have people will be looking at. So that gives us confidence and it's not a jam to the future story, right? Okay.
So let's move on. Thank you, Andrew, and move on to Usman. Hey, Usman.
Hey, thanks for the opportunity again. I have two questions, please. Firstly, on the special factors cash outs in the ex U. S. Business.
They have I mean, you spoke about some of the reasons why the cash flow guidance in the ex U. S. Business was a bit lower than CMD in 2018, I guess one of the factors I can see is that the special factors cash is slightly higher, dollars 100,000,000 to $100,000,000 higher than what was expected. And I just wanted to understand what happened there and what is the outlook Here to 2024, I know in the CMD 2018 presentation, there was a kind of a chart Showing the special practice cash items going down to around 700,000,000. But is that still the outlook or is it different?
And if so, why? The second question is for Thorsten. Just on maybe pushing back a bit on what is in group development and what isn't at the moment. I mean, T Mobile Netherlands, Obviously, doing really well. There's fiber uptake happening in the Netherlands.
So there are 2 uplift in the market seems to be in a very good place. So why is it why should it not go back into DT's ownership rather than you wanting to Monetize that asset. And just related to that, I guess, is there any scope in T Systems where I know a deal was attempted with IBM in the past. I mean, is there any scope to do anything with regards to key systems that can better surface the value of that business?
Okay. Let me start with the special factors. So first of all, Usman, you're right. We predicted a significant decrease towards 2021. I think we have been in the previous Capital Markets Day a little bit too optimistic.
And on the other hand, we also have reduced Cost significantly higher than we anticipated to be and therefore we needed some additional special factors in order to fund this. So if you take Look forward. So let me basically describe it in a free cash flow environment. We have EBITDA growth, which funds Our expanded CapEx envelope and the free cash flow growth in the European business to €4,000,000,000 And all of the Other items are basically neutralizing themselves out. So what we're going to do is, we expect obviously higher cash taxes in the upcoming years.
At the same time, we're going to see an improvement on the working capital and we're going to see an improvement on the special factors. So by this at the outer years of the current projection and we see whether we get there. But the last Capital Markets Day was a bit too optimistic on this one. But I think it's worthwhile to spend those special factors. You have seen our indirect cost structure, especially the significant amount of people which we let go over the past 4 years.
Thorsten, do you want to talk about the Netherlands?
Yes. With the Netherlands, And I need a tissue because I'm so well, first of all, Usman, it's a very fair point. It's So our crown jewel in the European portfolio. But having said that, it's mobile only in Europe, in a market where you have 2 converged So this is something that doesn't fit into our long term, let me stress it, European strategy of owning FMC Converged operators. And that's the reason why we've also taken it apart from the group in 2017, not only to focus In intensive care on this I don't say this word again, chicken ex Upsilon turning it into chicken salad, and I I think now it's a cuckoo vin.
So I didn't say that. So from that perspective, It's now the time to crystallize the value. But don't get me wrong, Oded. If the value that someone is offering us For the next, let's say, 5 years of journey with this fantastic team and fantastic company, we may not sell it. It's just now we put it out there so that you see that on the sum of the parts value, there is something that has a value of about €6,000,000,000 according to your Gestimates.
It gives us not huge deleveraging because we also lose some free cash flow, but it gives us some opportunity to do Other stuff that we may want to do, which I don't want to talk about for obvious reasons. So flexibility is king. You know how much I like optionality, Picking different buckets and seeing how we want to play around. So we cannot say all and everything. We have good ideas what we want to do.
And as much as I love the company, as much as I love the management team and the employees, sometimes you have to do stuff and to reallocate your Let's put it this way. In terms of T Systems, I think it's the same like on T Mobile Whole. And first, you need to fix an asset. And Adel started on a tough journey in 2018, and then he ran into corona before you can think about doing something with these assets.
Okay. Thank you, Thorsten. So next, we have Otavio at SocGen, please.
Hi. Thank you for taking the question. Congratulations on the results so far. The first one, it's on the leverage, And it's for Christian. What I appreciate about Deutsche is that your target is always been very consistent, clear.
And I would like if you can actually give a bit more granularity on the assumptions behind. Because one thing about Deutsche that differentiates from a lot of peers is that you have room Around your targets, you don't really go very straight to what you can achieve. So if you can tell us in terms of the assumption what you have baked in, In the participation to the team of PayBank, if you do, any settlement of the SoftBank options, I believe that you assume only cash despite you have got the option of delivering shares, DT shares in case. You mentioned about the Renewal of the tower leases with Grand Castle and SBA Comms in the U. S.
Do you have anything in the targets when assumptions are like in that one? So effectively, if you can talk around with assumptions, because the target is clear Your commitment is even more clear, but it would be interesting to know what's behind the assumptions. The second one is the Torsten, the question. Now Your preferred partner, at least so far, in the tower space has been Cenex. But what management of Cenex keeps saying is that the value is not on the towers Per se, but on the size and the future cash profile guaranteed by the tenants.
So therefore, my Question is, what is the contractual relationship between GD Towers and DT at the moment, particularly on the length of the contracts? Any savings that has basically been granted to DT if new contracts are signed? Is there any escalator included in these contracts? And the third, it's again to Thorsten. It's a bit of clarification.
When you talk about market leading on 3rd party share revenues, that's impressive. I was wondering if the 23% ratio you show in the slides, you already reflect the revenue from hosting the antenna But also additional services such as the backhaul services provided to third parties such as Telefonica Watchland. And when you talk about monetization, you also plan to Crystalized the value of the backhaul, that's a big differentiator for Deutsche in Germany and I guess in other markets. Thank you.
Okay. So let me start with the first question on the leverage, Itavio. Look, As I said early on, I don't want to change the corridor because I want to keep the discipline in the group and I think there's a violent agreement among the board to basically stay like this. The second one is, look, we have clear visibility what we need in order to get to 50.1%, how many shares this mean. Obviously, you've heard Peter Oswaldic yesterday talking about a share buyback of up to 2 times 20 in the years 2023, 2024.
So obviously, the share buybacks will help us to increase our position. And obviously, we got the €45,000,000 fixed price option, which will be accretive from my perspective, massively accretive and gives us access to a low price to T Mobile U. S. And another €56,000,000 on the floating Which obviously need to be converted at a market price. There are other levers in place, which we will not Declare and explain.
We have Thorsten is always talking about optionality Along two different dimensions. 1 is the tools which we can use. The second one is timing. I think we have time until 20 24, and we will let you know whenever we have done something what we have done, but I don't want to do kind of a front running.
Of course, Tobias, Jose and Alex are right when they say the value is not determined by the number of towers, but the size And the cash flow profile from the tenants, absolutely. And of course, we do have a market standard MLA in place between In group development and not group development, but our tower operations and TDG. It wouldn't be a good use of our time if I now dwell on what are the terms because in a deal, This will be completely started from scratch on that you discuss the things that are important to us and important to them. And that is where you see that a lot of things have changed, renewal clauses, all or nothing or The kind of as a number 1 or number 2 in the market you may Or may not like, if a tower company is offering, which I could do today, but most likely we are not going to do this, to offer a very low price to get someone else on the tower. So this needs to be negotiated and be balanced out.
I found it very interesting the MLA terms to see on the last two transactions that were happening in the European place. And we cross that bridge if we get there. But in principle, it's absolutely right, the size and the cash flow profile and the commitment that you may give As an anchor tenant on the build to suit program that the tower co wants to offer. As I said to you, we have an attractive company because The cash flow is very interesting that this tower co would get because we are going to build out a lot of towers over the next 3 years. And as I said, this year alone, we are building out about 1500 towers.
In terms of third party share revenues, 23%, Yes. That's revenues from other tower costs. It's not hosting of any, let's say, additional Services, there's a little bit of broadcasting in there, but that's not significant. And there's not backhaul in there. Of Of course, Bruno is always knocking on my door and said, hey, can we do this as well?
No, it's not. And it's also not planned to monetize this.
Great. Thank you, Thorsten. We've got 2 more questions. Time for 2 more questions. So the next one is from from James at New Street.
James,
hello. Hi, everyone. Yes, can you hear me okay? Hello? Yes.
Hi. Hi there, Craig. Yes, so thank you. Yes, so I have two questions, please. The first one, actually a little bit of a follow-up from Octavio's just now For Christian, I'd love to go a bit more into detail about the kind of thinking about how you might be allocating cash Towards TMOS, I'm a big fan of your decision today to push the leverage target out from 2023 to 2024, certainly on my numbers that would seem to give you now flexibility To exercise that SoftBank option before 2023, which might not have been there before.
So I So what I'm really wondering is given you've announced the moving out of that target by a year, why are you also not announcing today Exercising the SoftBank auction. I mean, presume if you're bullish on the T Mobile share price going up, it would be in your interest to Decide sooner rather than later. So it's interesting to understand a bit more about what are the factors you're thinking about there. And similarly with the buyback, I think Torsten suggested You might sell in pro rata, you might not. I mean, given again, Pune, you're bullish on the asset and you're wanting to increase your stake, What would be then the thinking on then going ahead and selling shares into a buyback, which might be seen as slightly contradictory If you're bullish on the long term view on the asset.
And then question for Tim. I know Tim, you were bemoaning the fact There were no questions about regulations. So here goes with one, which is I think we've lived through probably 10 years of Returns on capital declining in European Telecoms and now we're seeing really clear signs of it going up. I was just wondering in your discussions with the regulators, How that metric is coming into play in your decisions? Do you find regulators have ideas of where returns on capital Should be within the industry.
Do you think regulators are happy with where your targeting returns should be going? Do you see scope for further upside And returns beyond that before regulators might look to come in at some point intervene again? Thank you.
Okay. So let me start with the leverage question and why don't we exercise the options right now. So first of all, 45,000,000 shares are basically being determined on the transaction price, which is $101 So why should I do it right now? Because I have a guarantee on this American option to do it until the end of the period which is 2024. The second piece is the factor that I have declared I'm out of the comfort zone does not mean I can do whatever I want to.
So look, we expect This leverage right now to peak this year around 3.2 ish. We'll see how it plays out. If I basically I would exercise the floating options because I assume higher T Mobile U. S. Price.
Obviously, that would increase my net debt and we don't want to do this. And I think there's also a sequence, Torsten, right? Do we have to do the floating option first or the fixed price option first?
Fixed price.
So we have to do the fixed It's right option first. So that's a theoretical argument. So I think but there are other tools, I think you can think of how you basically secure a lower price. We don't have to exercise the options right now, but we have clear visibility on how we get to that 50.1%. And the question hasn't been asked, but this group is really determined to get the majority to 50.1% and not 60% or something Like this because there are other things which need to be done in the overall portfolio as well.
I do not want to be disrespectful, but there is no politician in the world who knows what a ROCE is. So maybe Thierry Breton understands it, but return on capital employed and the definition of this one is something Internal rate of return. Now even at a discussion where I talked about market capitalization and they were questioning what that does. So therefore, this is not something which which is in school books of politicians in Europe or in Germany. Therefore, make it simple, talk about what's going on.
And the pitch which we constantly do is, look, it's good that we have connectivity as a human right and we understand that It should come for cheap that people don't have to overpay on their Expenses on communication, but if it's too cheap, then we might reduce the costs. So allow synergies. But if you don't allow synergies because you don't want to see intermarket consolidation beyond what we have today, then you have to do something that there is enough funds available to invest into the expectation of higher fiber deployments and higher 5 gs. And so this wheel, this flywheel which we have showed has to work. And I have to admit that in Germany, this flywheel works Better than in maybe in other markets like Spain or like.
But that said, this is the way how they understand it. And now talking to Thierry Breton, talking to the German Chancellor's Office, German talking to the ministers here in Germany, My feedback is that they have changed horses. Their horse is how can we create a digital sovereignty, especially from China. How can we guarantee security of the infrastructure going forward that nothing is happening, that we never can get back mail from the outside world. How can we create innovation in Europe And enable digitization of businesses.
And what is your benefit what is your contribution to this one? How can you create an ecosystem for venture capitalists and cloudify This world, so Gaia X is a high topic of political leaders. Wherever you are, you have this topic. And they are and that is an impressive piece. I just said yesterday the day before yesterday, a session with the bonus chancellor Well, she was talking to the industry on ID Management.
There's a super big initiative going on, on ID Management in Germany, which shows that these guys are more on the use cases now than on the classical infrastructure. And this shows me as well that this Exantia regulation is not that they are trying to steer it from political angle, But that day, I'll leave it to the industries. Now I can tell you we will hear a lot of noise now during the course of this year in Germany because Every party will guarantee something to the citizen with regards to bandwidth, with regard to coverage and other topics. So we'll see how this has practically turned out at the end of the day, how it's getting financed. Nobody's talking about that.
Nobody's talking about when and how This is going to take place, but they think it's needed. And that is, I think, the opening for us or for me to say, guys, We are willing to do so. We need that for our society. We are a big enabler for digitization and future wealth. Here we are.
We need your support on this one. And then OSI and internal rate of returns and the amortization rate can be explained. And therefore, I think the balance of consumer prices to sustainable investments is Getting into a much better, equivalent.
Thank you, Tim. Okay, good. So it's all about equilibrium, right? Yes, that one. And in Germany, we Since the 1st April, bitstream fees are no longer ex ante regulated, right?
So they are subject to commercial regulation and general cartel law. Okay. So thank you, James. And let's move on to Steve at Redburn. Steve, hey?
Good afternoon, guys, and thanks again for the excellent presentations you've given. I'll go for 3 if I can. I want to come back on Taurus, but I actually want to ask Srinid, Not Torsten, who understandably has garnered most of the attention. Trini, Hello. I'm hoping Srinivas wants the question.
Yes,
yes, yes. Yes,
I guess,
Certainly,
you've been on both sides of the fence in terms of running challenger operators, big in India, now running an incumbent in Germany. Just interested to hear your thoughts on the importance of tire ownership in Germany vis a vis compared to the other markets you operated in and how active the discussion is between you and Torsten, in terms of the future of towers within the German unit, that would be super interesting to hear. And then a question for Torsten. Clearly, a lot of funky infrastructure models There on the wireline side, you can sort of goose the numbers in lots of different ways, but what's most important tends to be market penetration on network, How many customers you can get onto your fiber infrastructure. I'm kind of curious in that light how do you think you'll make a return in Holland where T Mobile has got less than 10% retail share on fixed.
The thought thinking about that, Kate Kent is building to 80% of the country. So how you're thinking you'll make a return on that investment? And then just a couple of So the detailed ones on the earnings guidance. Can you just confirm that we should assume 50% stake in T Mobile in the 175? And Christian, did you effectively place a ceiling on that stake of 50% in the last comment?
And also just the tax rate you're assuming for the next 3 or 4 years in that guidance would be very helpful as well.
Let me start, Steve. I want to hire you for my finance organization because Your face is always looking that serious and grumpy. I think you are very much qualified for our finance department.
After that calm event, so.
I can't just jump away from it.
Grumpy and focus.
Great sense of humor.
Yes. So Steve, Rather disappointingly, I agree with a lot of what Torsten said. It's a lot more fun when I disagree with it. But let me give you a couple of perspectives on things that I agree with, Right. First on Germany itself, I think Torsten is right.
There is a smaller than you think number of strategic sites. And those ones, I'm absolutely interested in making sure that we keep those golden sites or however you want to call them, right? Piece 2 for me, which is kind of just read across from some of the India experience on towers, how that compares to more mature markets. Look, I think There's kind of a couple of different tower plays, right? There's one which is effectively a pure financing play, right, which is effectively exploiting arbitrage in the market.
Now, I think you need to do it when you need to do it depending on
the state of your balance sheet.
I think there is a more interesting structural play, which is bringing in genuine expertise into managing towers and creating real value from the towers themselves by either getting in a team that's been there, done it before or actually creating more value through greater tenancy. And my instinct is always more on the second side rather than on the first side. And as and when we do stuff with the Kingmaker asset, I think what you will Land up seeing is much more a sense of how do we create general economic value from this and also how do we give ourselves exposure to an asset class that my personal belief is going to grow with time, right, because I think that's the way in which more and more mature markets are going to get structured. So I hope that answers some of the questions at least that you had on it.
Okay. We got
it now. You see. Sorry. Okay. So let me go ahead.
Okay. So our earnings guidance. So, Steve, let me dwell on this And that you see that we are sitting here not fighting is the lessons learned over the last 3 years on towers. And I tell you, This is happening at every number 1 and number 2 operator in a market where you have a guy who's running the NATCO and then there's a guy who's running the towers and it starts With just the CTIO running the towers and then the fight starts. And you see the power of this team.
We've lived through these discussions together over the last three years. We have a CEO in the German region who understands Shareholder value and who understands how we can participate in this asset class and that actually the towers I'm not a strategic control point. As long as you have an MLA in place that is protecting you via the golden sites, as Long as you have an MLA in place that is protecting you from the tower core of dumping tower capacity to other operators at very low price, As long as you are not at the mercy of the tower co and price renegotiations and pent and picking the towers and if you touch the towers with new antennas. So I think that gives you a good indication that we are fairly advanced in our thinking of what we need in order to get the best out of our shareholders for our shareholders. In terms of Holland, this is a question not for me.
This is a question that you should ask obviously the investors. And it's not lost on me that you look at it from this perspective, how you make a return in a 3 player market where you only have one tenant at the get go. We have given obviously certain commitments. And of course, it goes without saying that This smart team that is kind of committing to build out 1,000,000 fiber lines for us needs another tenant on it, and it will come over time. There are obviously also interesting discussions in this market about public to privates and what may or may not happen.
But Steve, forgive me, this is a question that you have asked the Fibreco whether they make a return on it and not so much for me. I like it because it gives me A showcase, I know what I pay for it, and I can go to the regulator in a non regulated market and say, hey, There's a huge asymmetry. And second, it gives me something to support us on FMC in the future.
Okay. So on the earnings guidance, Steve, first of all, yes, we assumed the 50% stake in T Mobile U. S. And again, let me repeat, this is why we said greater 1 75%. And we assume the current tax regime, which we have in the U.
S, because we don't want to speculate where the corporate income tax It's moving towards from 21%, nor do we want to speculate on a minimum tax burden, which is also being discussed. So I think we wait until the environment has come to a or the politicians have come to a conclusion, but that's the answer for your answer for your questions, sorry.
Very good. And Steve, let me say, I work in the Finance Department of Deutsche Telekom and I'd love to welcome you as colleague. Okay. So let's work on that. And before I pass on to Tim for his closing statement, Let me just thank you all for your kind and patient attention, the many good questions we have had and Also thank the management team and all those who have supported them to prepare these presentations.
I'd like to thank my team for their dedication and their hard work. And I hope you take something away from this Investor Day that is what we wanted to convey, which is our spirit of acceleration and excitement about the future and it's very significant, highly visible and great earnings growth that is ahead and how we will balance our capital allocation so it's to the maximum benefit of our shareholders. And with that, I pass on to Tim for his closing statement. Thank you.
Yes. Thank you very much, everybody. And before I go into the very short Summary, let me say thank you as well. I'd like to thank Hannes for making this Capital Markets possible Again and all the content, and I can tell you, cannot believe how much work we have spent into that one. I'd like to thank his Investor Relations team and our strategy team on bringing all this stuff together.
I'd like to thank my Board colleagues and the U. S. Team for making this event It's happening and I can tell you it feels a little bit here like X Factor because we are sitting since 9 hours in one studio here altogether. And I can tell you, always when somebody is coming off stage, we do this or we do that. And I can tell you there's one guy who is going into extension, which is Thorsten.
Real Madrid against Bayern Munich, it is nil nil. And therefore, he has to work on his presentation style and especially on the pictures on me. There's another thing I'd like to thank everybody who made this event here, even from a COVID safe working environment Possible. So you cannot believe how difficult it was. And hopefully, it was the last time that we had these difficulties.
And Even the technical staff here, I'm very proud about technicians, about the camera people and all the people in the studios here because it showed The digitization and the virtual world is really working. There was no slippery, nothing. Our work our network was always stable Allocating all the details. So great work. Thank you for that one.
Now Summary, summary. And I'll do that quickly because I know you are tired. I'd like to thank you for listening to us for 9 hours. And I was thinking about a picture and you sit here at your Home offices and watching us for 9 hours. Think about watching 9 hours a Netflix series, how you feel after this, This binge watching of Deutsche Telekom.
I feel sorry for that one. Look, this was the 4th episode of binge watching Capital Markets Days of Deutsche Telekom. I'm a main actor. I'm still alive. This is surprising in Netflix series, but that is good.
The rest of the team is there. So thank you for 9 hours of binge watching Capital Markets Day. I hope you got something. I have to say there's one colleague. She didn't join us today, which is Birgit Boaler, our Head of HR.
And She deserves an appreciation as well because she was listening for 9 hours, her team here. Look, I found we can compensate that for all of you, We make an extra episode, 9 hours of HR. You will really enjoy that, I would say. Now coming to some serious comments here that Remember on the last Capital Markets Days, I was on stage at the end and I was talking about The European market, a single market, I was talking about the regulation that is going to improve. I was talking about the opportunities of digitization.
I was Talking about the opportunities one might have in the U. S. With a deal, and I was talking about growth. And At that point in time, I was sharing a lot of optimism in an industry which was in really dire states in a very pessimistic and negative approach. And honestly, now 4 years down the road, we delivered.
We were able to deliver a company and to show you a company which is growing. I will do that again, and I'll do it again. I know that now we have accelerated on what we did. We have delivered on a lot of things. And we even say our targets should be higher than they were the last time.
But I do that again because I'm optimistic about the opportunities around digitization. I'm optimistic about the setup Deutsche Telekom and its portfolio where we are today. I'm very optimistic about the team and the attitude, the culture Deutsche Telekom has evolved over the last years, which gives us a lot of self confidence to tackle the challenges which is lying in front of us. And therefore, I hope that I was able we were able to share a bit of that optimism around that we believe We have a really right to play and we should be the Choice, the pick which you should choose in the telco industry going forward. I think Deutsche Telekom is not a one bet company.
We are a multi bet opportunity. From all the angles which we are playing in the U. S. With the synergies, In Germany now with our fiber attack, when it comes to the 5 gs deployment, the B2B opportunities where we as a Former incumbent have all the right to play and to grow. This is a multi bet opportunity, and hopefully, we came across that way.
Now the but, now the but. I can tell you if the cameras are off, I will tell Monty one thing. Do you believe everything you have said, this leading here, this kind of premium there? We are the best. We are outperforming all the others.
I can promise you one thing. We are coming down to earth. This is something which we are striving for. This is something we maybe get as a feedback in our industry. But I can tell you only the paranoid survives.
And if you talk about leading, leading is not for me something static. Leading is dynamic. If we talk about leading European telco, leading is not something which is a benchmark To others, leading is an attitude. It's the way how we're striving all the time to do the best for this company. And I cannot promise you that we will deliver on all these ambitious targets which we have laid out.
But can you promise once one thing that we have the attitude to always do the best to achieve what we have committed over the last 9 hours. This is our playbook for the future, and we are trying to play that playbook as best with a leading attitude going forward. This world is not going to be easier Over the next 3 to 4 years, we have this big conflict between China and the Americas. These 2 hemispheres which are decoupling. This is triggering challenges on the supply chain.
This is triggering challenges about the volatility of markets. We have this huge indebtedness of our societies after COVID-nineteen. We have the nationalism in
a lot
of countries who feel challenged from the rest of the world. We have political unrest in our society. And therefore, I think that the purpose of trying to help societies to become better, to enable societies for future wealth, To be sustainable in what you're doing, the purpose to bring that across into the companies and to your employees, This is a big driver for the energy which is needed to give orientation this time. Telecom Will be a lighthouse, an orientation point for the society and its employees. And this, I think, is Releasing a lot of additional energy, which makes us possible to fulfill the commitments Which we've given.
And exactly, that is, let's say, what we are about. It's about the passion for our brand. It's about the passion for the purpose Of what we are doing for societies. And the good thing is, we are not stretched. We have one clear area where we are.
We are the transatlantic telco. We are in one hemisphere where we can play this playbook. This is a big advantage, not only from a risk and a volatility perspective, but even as well from an identity perspective. So we hope that we can convince More buyers into our stock, more people who trust in Deutsche Telekorp, the transatlantic leader. Thank you very much for joining us and hope to see you soon healthy and physically.