DT CEO – “We are changing the narrative on 5G”

• Deutsche Telekom held a press conference as part of its 2024 Capital Markets Day
• CEO Tim Höttges presented an overwhelmingly positive picture of the German telco’s progress and prospects
• He called out 5G as a major success story and proclaimed that DT is “changing the narrative” on the value of 5G investments and services

Deutsche Telekom CEO Tim Höttges had a clear message for the global telecom sector and for his European peers in particular during the giant German telco’s capital markets day press conference that was webcast on Thursday morning: 5G, when done properly, delivers improvements in customer numbers, market share and profitability. “We are changing the narrative on 5G,” he proclaimed. 

Höttges covered a great deal of ground in his presentation – much of what he focused on is referenced in this announcement – but he constantly referred to the telco’s focused investment strategy, which underpins everything the company does and plans to do. “We invest more than our competitors, and if we invest more than our competitors then the customers will join us because our network infrastructure, mobile communications and fibre, is better than everybody else’s. And if you have more customers on our big platform, we also have economies of scale, and we can operate our factory in a very efficient way and this means we have better financial returns. We simply earn more. And if we earn more, then we also have more possibilities to invest again, and this flywheel [approach] has proven its worth… more than €71bn was invested into our infrastructure since the last capital markets day [in 2020] and we have celebrated enormous successes” as a result of that investment, he said.

“We have one strategy for the entire group – great focus and consistency in the strategy, no matter where we operate. 5G is a huge success story. And this is a narrative I would like to bring home. We took a look at the 5G business case. We started early with 5G. Everybody [else] is complaining that you can’t make money with 5G but I can assure you, 5G is our success story. The business case is positive – you saw it in the United States with the Sprint acquisition [in 2020, when T-Mobile US and Sprint merged] and the use of the 2.5GHz network, how we ran away from everybody else, but also in Europe and in Germany, we are earning money with 5G… we have won market share and sales. And this helps us amortise the infrastructure. The infrastructure is continuously expanded and no matter where we are, we always want to be the number one with mobile communications. If you build good infrastructure and if you provide great service in combination with a brand that is very strong, then you are the winner,” stated the CEO during his presentation.  

And in response to a question from Bloomberg’s Jillian Deutsch, Höttges expanded on the theme. 

“There was this sentiment in Europe that 5G is loss making… no additional revenues, no additional services,” he noted. But when the topic was debated within the Deutsche Telekom group, which includes T-Mobile US (in which DT holds a majority stake), “the Americans were [saying], what the hell is going on in Europe. Without 5G we would never be that successful, we made our fortune based on 5G services.”

For Höttges, making a success of any strategic plan is all about decision-making and commitment. At T-Mobile US, “we deployed the 2.5GHz spectrum across the country, and we have blown out the lights of Verizon and AT&T… because we were able to provide countrywide 5G services while these guys were waiting for the clearing of the 3.5 GHz spectrum with a totally different propagation, another build-out logic and more expensive investments – our success is very much based on this clear commitment toward 5G based on the mid-band spectrum. 

“And it’s true the Europeans are always complaining about the high spectrum cost, plus the build-out cost without getting additional service revenues. Now, we were an early adopter because we always have this expectation, this aspiration, to be number one. We lead in speed, we lead in coverage – look at the Ookla test results wherever we are operating. And the consequence is that we gain market share… we gained 3% to 5% market share in almost all the markets where we were leading on the 5G,” boasted the CEO. 

“This is [generating] revenue and the revenue is bringing profitability. And if you look at the overall cost… we are already earning our capital cost, or above the capital cost, on services in the mobile network – it is a positive case already. We are changing the narrative… for us, we made 5G a winning strategy.”

That is indeed a very different story to those told by others in the telco sector and not just elsewhere in Europe – see 5G reality bites hard in South Korea.

But of course, not every operator has the scale of Deutsche Telekom and there’s no doubt that the market and commercial success of T-Mobile US in recent years has helped to fund Höttges’s plans. But that success is no accident, no fluke – and there’s no denying that Deutsche Telekom’s strategy, and the way it has executed that strategy, has paid off. And now the telco is considering increasing its stake in T-Mobile US, using some of the €15bn in cash it expects to generate in the next four years that hasn’t yet been allocated to a specific strategic plan. 

So it’s not just about scale, but there’s no doubt that scale helps a lot – that’s something that the European policymakers in Brussels are likely to take into account as they decide whether to enact some of the telecom sector consolidation proposals made recently by Mario Draghi in his digital sector report for the European Commission – see EC report proposes ‘fair share’ payments, easier telco M&A.

- Ray Le Maistre, Editorial Director, TelecomTV