Deutsche Telekom boss Tim Höttges presented more than the usual solid performance targets at the recent Capital Markets Day. The CEO, whose contract runs until 2026, is celebrating his strategic lifetime achievement – the rise of T-Mobile in the United States market – with a gift for all shareholders.

The abundant cash inflow at T-Mobile US, which will contribute more than 80% of the Group's expected free cash flow of EUR 19 billion after leasing costs in the current year, will finally reach T-shareholders. The dividend, with a planned increase of 17%, will make significantly greater leaps than before. And free cash flow will also be used for a share buyback of no less than EUR 2 billion next year – which has the added attraction for Deutsche Telekom of reducing future dividend payments. The record dividend goes hand in hand with a milestone that the Group has achieved in a multi-year tour de force: Debt is being pushed into the targeted rating comfort zone.

Those who stand on the summit, however, only have the descent left. Höttges will, therefore, be well advised to pay close attention to where he steps, so that he does not lose his balance too quickly. For good reason, Telekom is endeavouring to remain flexible via share buybacks. It has also set aside a cumulative financial reserve of around 15 billion euros in the medium term for „strategic options“ of various kinds. Höttges has never made a secret of the fact that he favours further investment opportunities in the USA, because the expected return is greater there.

This was indeed obvious in the past, given the dynamic growth of T-Mobile US, which was able to steadily take market share from the competition, and at very attractive margins in view of the high pricing levels in a global comparison. In the meantime, however, the industry in the USA has also moved into areas beyond mobile telephony, and is to a certain extent pursuing the convergence strategy that is so unprofitable in Europe. This involves nothing less than a redistribution of the broadband market, which in the USA has so far been largely controlled by the cable companies.

T-Mobile US has already entered the battle for customers here too, whereby the company is initially exploiting the cost-effective combination technology based on the 5G mobile communications standard, known as fixed-wireless access. However, industry experts expect that this technology will ultimately achieve a maximum market share of 10%, meaning it is reaching its limits. In the second quarter, the growth of such new customers has already weakened considerably compared to the previous year. T-Mobile is therefore pressing ahead with the expansion of fibre optics. Even if this is done in capital-efficient joint venture structures, the overall requirement is enormous, and will be realised in a relatively short period of time.

Analysts assume that the USA is in the middle of a massive expansion phase, in which the customer map will be mapped out in 2025 and 2026 in particular. T-Mobile will have to keep pace and mobilise considerable funds. Both additional debt capital, which Deutsche Telekom would have to consolidate, and the raising of equity could pose problems for the Bonn-based group.

In addition, there is something that has been deliberately kept out of the limelight in the domestic market: the mere development of households with fibre optics does not generate cash flow. The connections must also be used by the customer. In Germany, the take-up rate for Telekom's fibre optic lines has been extremely poor at around 14%, which is another reason why the medium-term cash flow target outside the USA is at the lower end of the range in the past three-year plan. Deutsche Telekom still has a lot of work to do here – on both sides of the Atlantic.