Yahoo Finance Deutsche Telekom Plans €2 Billion Buyback, AI Deployment
(Bloomberg) -- Deutsche Telekom AG said it plans to propose a buyback program of as much as €2 billion ($2.2 billion) in 2025 and will lean on artificial intelligence to make itself more efficient over the next three years.
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Europe’s largest telecommunications carrier will also propose a dividend of 90 cents per share for the 2024 financial year, up from 77 cents last year, the company said in a statement on Thursday, released ahead of the company’s capital markets day. The share repurchase program for next year follows a similar €2 billion buyback in 2024.
Deutsche Telekom is outperforming its peers in Europe, buoyed by subscriber growth at T-Mobile US Inc. where the company has a majority stake. That stake has given the company the financial flexibility to deploy higher shareholder returns than many of its peers, and the company said it will use extra cash to continue increasing its stake in the US-based phone carrier or to buy back shares.
Deutsche Telekom’s financial outlook indicates the company is leaving itself flexibility for further cash returns to shareholders, increasing their T-Mobile stake or “the outside chance that they might need to be ready to react in case a much larger value-accretive deal in the US emerges,” James Ratzer, an analyst at New Street Research, said in a note on Thursday.
Deutsche Telekom shares rose 1.3% to €27.09 at 12:48 p.m. in Frankfurt trading. They have climbed about 25% so far this year.
Chief Executive Officer Tim Höttges said the carrier plans to deploy more artificial intelligence tools internally, initially focusing on tools for customer service, such as self-service apps and an AI-supported messenger service. Deutsche Telekom already uses Meta Platforms Inc.’s Llama generative AI, though Höttges said the company is “agnostic” in choosing large language models.
Deutsche Telecom is building at least three data centers, which will initially require 300 megawatts of power and will possibly ramp up to one gigabyte. Höttges said they have locations in mind for additional sites, although it’s been hard to find the right real estate, the energy and water supply.
“It’s not easy to compete with us, because now we also have liquidity,” he said in a press conference on Thursday. “We no longer have to think about: How can we create majority in the United States? Where do we invest? Or where do we get enough funds for investments?”
The company said annual service revenue growth is expected to average about 4% through 2027. Organic service revenues grew 3.6% in 2023.
Adjusted earnings before interest, taxes, depreciation, amortization and after leases is set to grow by an average of 4% to 6% per year during the period, the company said. Deutsche Telekom had forecast adjusted Ebitdaal growth of about 6% for this year.
(Updates with analyst, CEO comments from fourth paragraph)
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