Telefonica

Market report: Deutsche Telekom

The $DTE (-4,46%) remains a dominant player in the German telecommunications market, supported by strong financial results and ambitious projects. In 2024, the Group achieved strong revenue growth, particularly through fiber and mobile projects, and exceeded forecasts in several segments .

Current projects and developments

1.Fiber optic expansion:

- Deutsche Telekom plans to connect around 2.5 million new households to the fiber-optic network (FTTH) every year until 2027. The total number of households that can be connected is set to rise to 17.5 million, with a target take-up rate of 20% .

- A record 131,000 new fiber optic tariffs were already achieved in the third quarter of 2024 .

2.5G network and digitalization:

- The expansion of the 5G network is being systematically driven forward, with a target network coverage of 95% in Europe by 2027. The company is also investing in campus solutions and network slicing.

- Customer care processes and self-service offerings are increasingly being optimized using artificial intelligence to increase efficiency.

3.Business customers and B2B:

- Global business with business customers, particularly via the subsidiary T-Systems, is to be accelerated through cloud-based platforms and ICT solutions. Revenue growth in the billions is expected .

4.Sustainability and financial flexibility:

- In addition to record dividends (90 cents per share), Telekom is planning share buybacks worth up to 2 billion euros .

Competitive situation

Deutsche Telekom faces intense competition from other major providers such as $VOD (-7,27%) , $TEF (-4,05%) (O2) and regional players such as 1&1. While Vodafone and Telefónica are also investing in fiber projects and 5G, Deutsche Telekom stands out due to its dominant market position and global commitment.

Competitors:

-Vodafone: Strong focus on IoT and 5G technologies.

-Telefónica Germany (O2): Aggressive expansion of low-cost offers and regional partnerships.

-Freenet and 1&1: Increasing focus on innovative tariff models and attractive price points .

Prospects and possible new projects

Deutsche Telekom plans to further expand its digital offering, with a focus on payment services, AI-supported solutions for end customers and sustainable infrastructures. In addition, future investments in cloud-based services and partnerships could further increase revenue in the B2B area. Expansion in Europe remains a key area, while growth via T-Mobile US continues to be a key driver in the USA.

Overall, Deutsche Telekom is demonstrating a strong strategic focus on both sustainable infrastructure and digital innovation. It is expected to maintain and further expand its leading position in the German market.

https://www.telekom.com/de/medien/medieninformationen/detail/zwischenbericht-drittes-quartal-2024-1083042

https://www.mordorintelligence.com/de/industry-reports/germany-telecom-market

https://www.telekom.com/de/medien/medieninformationen/detail/deutsche-telekom-will-wachstum-beschleunigen-1080408

Telefonica Q3 2024 $TEF (-4,05%)

Financial performance:

• Revenue: Telefónica recorded revenue of 10.023 billion euros in the third quarter of 2024, a decrease of 2.9% compared to the previous year. The decrease is mainly due to currency fluctuations, which had a negative impact of 4.2 percentage points.
• EBITDA: Adjusted EBITDA amounted to EUR 3.260 billion, a decrease of 2.5% year-on-year, albeit with a slight margin improvement of 0.1 percentage points to 32.5%.
• Net income: Net income attributable to shareholders amounted to just EUR 10 million in the third quarter of 2024, which was heavily influenced by non-ordinary expenses.

Balance sheet overview:

• Total assets: Total assets amounted to EUR 100.484 billion as at September 2024, a decrease of 3.7% compared to December 2023.
• Equity: Equity attributable to shareholders fell by 5.9% to 20.562 billion euros.

Income structure:

• Operating expenses: Operating expenses fell by 3.8% year-on-year to EUR 7.084 billion in the third quarter of 2024.
• Impairments: Included a non-cash impairment of goodwill and other intangible assets in Peru amounting to 314 million euros.

Cash flow overview:

• Free cash flow (FCF): FCF increased by 89.5% year-on-year in the third quarter of 2024, supported by a strong operating performance and natural hedging effects.
• Investing activities: Net capital expenditure increased by 51.3% year-on-year to EUR 4.76 billion in the first nine months of 2024.

Key figures and profitability metrics:

• Debt ratio: The ratio of net debt to EBITDAAL was 2.76x as at September 2024.
• EBITDA margin: Slight margin improvement of 0.1 percentage points to 32.5% in the third quarter of 2024.

Segment information:

• Spain: Sales growth of 1.0% compared to the previous year in the third quarter of 2024, as well as EBITDA growth of 1.0%.
• Brazil: Year-on-year sales growth of 7.1% in the third quarter of 2024.
• Germany: Decline in revenue of 1.6% in the third quarter of 2024, however EBITDA grew by 3.0%.

Competitive position:

Telefónica remains the leader in FTTH (fiber) and 5G, supported by significant investments in network expansion.

Forecasts and management comments:

The company reiterated its guidance for 2024, with expected revenue growth of 1% to 2% and EBITDAAL - CapEx growth of up to 13%.

Risks and opportunities:

• Risks: Exchange rate volatility, particularly from the Brazilian real, and competitive pressure in key markets.
• Opportunities: Expansion in FTTH and 5G as well as potential regulatory changes in Brazil and the EU.

Summary of results:

Positive aspects:

Strong free cash flow growth of 89.5% year-on-year in the third quarter of 2024, indicating solid operating results and effective financial management

Improvement in the EBITDA margin by 0.1 percentage points year-on-year, a sign of efficiency in cost control.

Further growth in Spain and Brazil despite challenging macroeconomic conditions.

Strategic focus on the expansion of FTTH and 5Gstrengthening the market position.

Effective hedging strategythat mitigates the negative impact of exchange rate fluctuations.

Negative aspects:

Decline in sales of 2.9% year-on-year in the third quarter of 2024, which has a negative impact on revenue.

Significant non-cash impairment in Peruaffecting the balance sheet and comprehensive income.

Decrease in net profit due to non-recurring expenses, which could make the company less attractive to investors.

Increased net expenditure on investments by 51.3 % compared compared to the previous year, which ties up capital and may limit short-term financial flexibility.

Competitive pressure in the core marketswhich could put pressure on margins in the long term.

Summary Earnings, 07.11.

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Rev EU8.98B (est EU8.88B)

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REV. EU10.02B (est EU10B)

Adj. EBITDA EU3.26B (est EU3.26B)

Net Income EU10M (est EU357M)

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It was the time when shares went up for a long time. Fortunately, I sold several shares. Now I'm starting to fear a sell-off. Will it continue to go down? I will soon be focusing more on cryptocurrencies.

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