Earnings call transcript: Deutsche Telekom Q3 2025 beats EPS forecast

Deutsche Telekom reported its third-quarter 2025 earnings, surpassing EPS expectations with an actual EPS of €0.55 compared to the forecasted €0.5083, representing an 8.2% surprise. However, revenue fell short of forecasts, coming in at €28.9 billion against an anticipated €29.14 billion, marking a slight 0.69% miss. The company's stock reacted negatively, with a pre-market decline of 1.14%, trading at €27.31.

Key Takeaways

• EPS exceeded expectations by 8.2%, while revenue fell short by 0.69%.
• Stock price dropped 1.14% in pre-market trading.
• Deutsche Telekom raised its full-year EBITDA guidance to €45.3 billion.
• The company launched new AI initiatives, including an AI-powered phone and network monitoring system.

Company Performance

Deutsche Telekom demonstrated steady growth in the third quarter of 2025, with a reported net revenue increase of 1.5% year-over-year to €28.9 billion. The company's service revenue grew by 2.2%, reaching €24.7 billion, while adjusted EBITDA AL saw a slight increase of 0.2%, totaling €11.1 billion. Despite these gains, free cash flow declined by 9.2% to €5.6 billion, reflecting ongoing investments in AI and digital infrastructure.

Financial Highlights

• Revenue: €28.9 billion (+1.5% YoY)
• Earnings per share: €0.55 (+9.5% YoY)
• Adjusted EBITDA AL: €11.1 billion (+0.2% YoY)
• Free cash flow: €5.6 billion (-9.2% YoY)

Earnings vs. Forecast

Deutsche Telekom's actual EPS of €0.55 surpassed the forecast of €0.5083, resulting in an 8.2% positive surprise. However, revenue missed expectations, coming in at €28.9 billion compared to the forecasted €29.14 billion, a 0.69% shortfall. This mixed performance reflects the company's ongoing challenges in balancing growth and operational efficiency.

Market Reaction

Following the earnings announcement, Deutsche Telekom's stock experienced a 1.14% decline in pre-market trading, settling at €27.31. This movement contrasts with the broader market trends, as investors reacted to the revenue miss and cautious outlook, despite the positive EPS surprise. The stock remains within its 52-week range, which spans from €26.01 to €35.89.

Outlook & Guidance

Deutsche Telekom has raised its full-year EBITDA guidance to €45.3 billion and set a free cash flow target of €20.1 billion. The company anticipates an adjusted EPS increase to €2, driven by continued investments in AI and network infrastructure. Plans to expand its fiber optic network and add 1 million fiber customers by 2027 are also underway.

Executive Commentary

CEO Tim Höttges emphasized the company's commitment to innovation, stating, "We won't stop. We are acting." He highlighted the transformative impact of AI, saying, "There is no area, no process that is not changed by AI." Höttges also reassured stakeholders with, "We are sending a clear message. We deliver on our promises."

Risks and Challenges

• Intense broadband competition in Germany could pressure margins.
• Slow growth in the broadband market may hinder revenue expansion.
• Ongoing investment challenges in the telecommunications sector.
• Potential market consolidation could alter competitive dynamics.
• Economic uncertainties and regulatory changes in key markets.

Q&A

During the earnings call, analysts inquired about Deutsche Telekom's AI implementation across business segments and the challenges of expanding its fiber optic network. Discussions also covered potential market consolidation and the company's Team Mission network for government services.

Full transcript - Deutsche Telekom (DTE) Q3 2025:

Philip, Moderator/Introducer, Deutsche Telekom: Good morning, ladies and gentlemen, colleagues here in Bonn. We're reporting today on the Q3 figures: Christian Illek, the CFO of Deutsche Telekom, and Tim Höttges, the CEO. Tim will start as usual.

Tim Höttges, CEO, Deutsche Telekom: Thanks, Philip. Good morning, everyone. I think everybody is aware that our market environment is not easy. Every day you can read up on this in the media. Investments are being cut back everywhere. Dividends are cut back, or companies are downsizing their workforce. That is no cause for celebration. I have just come back from Tel Aviv. I spent five days in Tel Aviv, and the momentum that I saw there, I would wish that we had the same. This is not nice, generally, but I am all the more pleased to be able to paint a different picture today, and I am happy that Deutsche Telekom is doing very well. Now, we are delivering, and we are acting, and that is the most important thing: to be reliable, fixated on growth. We are keeping our word. We remain on course. In terms of our capital market targets, we are acting.

In the first nine months of 2025, we've delivered strong results: 3.7% organic revenue growth in the service business, 4.4% organic growth in EBITDA, 6.8% growth in our free cash flow, and 9.5% growth in the adjusted EPS. That's an important metric. That means we are fully on track in terms of what we promised to the capital market and our investors. Of course, we are benefiting very strongly from T-Mobile US. I mean, that's just a fact. It's our biggest business. Our colleagues across the Atlantic have already raised their guidance, and today we are following suit. Our full-year guidance for business outside of the United States remains unchanged. We want our shareholders to benefit, too. This is why we are sharing this success with them. The Board of Management is planning to increase the dividend for the business year 2025 to EUR 1.

This makes it the highest-ever dividend payout in our company's history. We will additionally buy back shares worth up to EUR 2 billion. In total, this will create a total shareholder return of almost EUR 7 billion. Ladies and gentlemen, we have also made good progress strategically across all regions. In the United States, we have not only maintained our growth path but accelerated it with a series of successful acquisitions. In Germany, we continue to invest in the future in a systematic way with a record-breaking fiber build-out, with Europe's first AI factory. We are showing that in Europe this is possible. You also attended the press conference with Nvidia. High-performance technology is being built in Germany as well. In all areas of Deutsche Telekom, we are now using AI in customer service, in internal knowledge management, in sales, in technology.

Coming back from Israel, I can tell you, and seeing the momentum there in digitalization, I have come back with a lot of energy and want to accelerate things in our company as well. Our key financials are trending well as well. Our earnings are growing year on year in all segments organically. T-Mobile US adjusted core EBITDA stands at 6.8%. In Germany, while we are growing by 1.4%, we are below our expectations from the capital market day. Following my speech, Christian Illek will comment on this. Growth in Europe is at 5.9%, and our system solution business has developed very well: growth of 11.7%. The total group is definitely on track. Ladies and gentlemen, we are the network, and we are the best network. I think everybody in Germany is aware of that.

We can see it from all of our surveys, but we are making the network better every single day. In the past 12 months, we have reached 3.6 million additional households in Europe with our fiber network. That's almost 23 million people that can now subscribe to a fiber optic connection from us or have already signed up. A particular focus of our attention is Germany, of course. Here we are approaching the 12 million mark for homes passed, and we continue to invest in expanding the network. 2025 has already been a record-breaking year for us. Never have we passed so many households: 1.7 million in the first nine months of this year. Never have we connected so many customers: 474,000 homes connected.

All this is thanks to a more efficient build-out, making use of tools like artificial intelligence to speed up our planning at lower cost, which means that our strategy is paying off. We are building out faster, smarter, and more sustainably. We also participate in a tax benefit from the accelerated depreciation expense. Here the federal government really has delivered, and we will reinvest these additional funds, this financial gain in its entirety. I think this is a clear commitment that we are showing here, that the incentives coming from the federal government are really a good thing, and we will keep investing these additional funds in the fiber build-out. At the same time, we want to continue adding 2.5 million homes passed every year. We will focus even more strongly on connecting rural areas.

That's more expensive when it comes to the build-out, and that's why we need these additional funds. We want to connect more multi-dwelling units also. We want these lines to be used also. Focus on MDUs, and also we want to strengthen our broadband business in the long term. Optical fiber is the technology of the future. These days, there are only few skeptics now, and the science-backed arguments for this technology speak volumes. Just last week, the German Professional Association for Optical Fiber, BUGLAS, published a comparative study of cable networks versus optical fiber. The findings are: fiber offers up to 20 times faster upload speeds. Data packets travel 2.5 times faster from the terminal equipment to the server and back. More users and more data traffic are no problem because fiber is scalable.

The underlying problem with the fiber build-out is not a fundamental skepticism about the technology itself, but unfortunately, the much too low take-up rate for lines. I mean, our vectoring and super-vectoring network in Germany is so good and has been accepted so well. Many people are quick to criticize the lack of fiber build-out in various German regions, but once it arrives, the numbers of people signing up are extremely modest. The fiber build-out remains incomplete. This is also a thorn in the side of the federal digital ministry. We therefore explicitly welcome the government's recently launched information campaign. Fiber build-out is a marathon and not a sprint. The more support we receive, the better. For example, it would help us if government would commit itself to using fiber exclusively.

Government could also give us a helping hand with legislation, for example, by allowing a build-out in multi-dwelling units by law or by accelerating approvals. Simpler, more digital, by actually making it possible to do more. We are definitely willing to do that. The United States is a prime example of how different it can be. There, our fiber joint ventures are growing as planned, serving more than 930,000 customers with hyper-fast fiber. With Srini Gopalan, T-Mobile US has a new CEO who knows the build-out challenges like nobody else. What about mobile communications? Here the situation is very clear. We are clearly in the lead, as attested most recently by trusted brands such as Computer Bild in Germany, UCLA in Austria, Poland and Greece, Umlaut in Greece, and Open Signal in the United States.

We are winning all the tests that are supported by their publications, and we're very proud of that. Our expectation is to maintain this leadership in all of our markets and even to extend our lead. Project NEMO in Germany, for example, is a prime example of that. Our customers recognize that our networks are first class, and they are rewarding us for this. In the United States, we're excited to be setting records in the wireless sector. More than 5.4 million people signed up for a plan with us in the first nine months. These are postpaid contracts. Just look at prepaid as well. That's 1.3 million net additions of customers more than in the prior year period. In Germany and Europe, our mobile contract net additions reached more than 1.2 million. You can see that our flywheel, our strategy, is really paying off.

Broadband business in Europe is growing solidly, although it's slowed slightly in Germany. Competition in this field is intense. As I outlined before, we have a new approach on the fiber build-out, and this is how we are going to tackle this now. Ladies and gentlemen, we won't stop. This is one of our guiding principles, which also means we will keep investing in Germany as a place to do business, in the future, in artificial intelligence. In January next year, we will open an AI factory in Munich. Our new AI industrial cloud is being built in the heart of Munich, deep underground. Ultra-modern, state-of-the-art technology and open for startups, SMEs, industry, research, and the scientific community, powered by 100% green electricity with the combined computing power of 2.3 million computers.

I can tell you one thing: this is what many digital experts in Israel are envious of, the kind of capacity we can make available to industry here. This project is made for Germany. You know, it's a play on words that we're using in our communication. We are bringing together the biggest specialists in this field: Deutsche Telekom, Nvidia, SAP, and other partners. Between the initial idea and the launch of this, just six months have passed. This project is the pure embodiment of our can-do mindset. In giga speed, we're making Germany's economy future-proof with AI. This doesn't just apply to manufacturing industry, but also as a service provider for the public sector. We are continually challenging ourselves internally, too. In the area of customer service, for example, our FragmentGenta chatbot, supported by AI, now has a first resolution rate of 55%.

Now, this helps us save money, and it helps us improve the customer experience. Recently, I dealt with the company that builds the agents that support the chatbots, and there is clearly more to come. This will become even more exciting in the future. For our business outside the US, we expect cost savings of around EUR 800 million by 2027, and we are convinced that we can achieve even more. That is also our can-do spirit, with data, with technology, and with the necessary care and responsibility. A further key element of our strategy is sustainability. Here, we have also made good progress. Despite rising data volumes, we have been able to reduce our energy consumption Europe-wide, and we have won multiple awards for this. I think this is an excellent result.

A lot is going on in the engine room, kind of behind the scenes that not too many people are aware of when it comes to our server architecture and other aspects. Ladies and gentlemen, I will end with a look at our revised guidance. For the third time this year, we are raising our guidance for EBITDA AL and the free cash flow AL of the group now to around EUR 45.3 billion, around EUR 20.1 billion as far as the cash flow is concerned. Adjusted earnings per share are expected to increase to around EUR 2. A major driver of this is our acquisition of US Cellular. For our business outside of the U.S., our guidance remains unchanged at EUR 3.6 billion. We are sending a clear message. We deliver on our promises.

We invest in the future, in fiber, in AI, in our people, and we are not waiting for others to act. We act. The best networks that connect people today and tomorrow, coming from Deutsche Telekom. Future technology that strengthens our economy. We want to be as dependable as possible. We will stay courageous. We will keep moving. We won't stop. With that, I will now hand over to you, Christian. We won't stop. Thanks, Tim, and good morning from my part. I will keep my usual structure for Q3. First, I'll give an overview of the group's financial metrics. Then I'll look at the operational development of the segments. Then I'll close with a comment on the development of free cash flow, adjusted net profit, and net debt. The group's financials, when you look at the overall development in Q3, were very positive.

Reported net revenue rose by 1.5% to EUR 28.9 billion. That is a growth of EUR 434 million. This includes negative exchange rate effects almost entirely from the US dollar, which was down $0.07 over the period. I will talk about the exchange rate effect on the other metrics as I come to them. Reported service revenue in the group increased by 2.2% to EUR 24.7 billion. This increase of EUR 543 million was reduced by exchange rate effects here as well, totaling EUR 935 million. The group's reported adjusted EBITDA AL rose in the third quarter by 0.2% to EUR 11.1 billion. That is up EUR 18 million, including the reducing effects from changes in exchange rates of EUR 431 million. This brings me to the development in the operating segments. As usual, I will start with the US. They reported on their figures on October 23 as required.

T-Mobile US had record customer growth in Q3. This was driven by the combination of the best net worth, the best value for money, and the best customer experience. Total postpaid net additions, as Tim mentioned, amounted to 2.3 million in these three months, marking that's 700,000 more year on year. Also, with this particularly valuable postpaid phone net adds, that stood at 1.01 million. That was around 142,000 more than in the same period of the prior year. That was also well over the average analyst expectations. The growth in customer. We are seeing, though, a slight increase in the churn rate to 0.89%, up from 0.86% in the same period of 2024. We continue to lead the industry with the lowest churn rate. Also in Q3, we saw a combination of high-speed internet and fiber optics rising by 160,000.

For 14 quarters in a row, we've grown by 400,000 customers. That is an absolute record. Our customers stand at almost 9 million customers. Our long-term goal with fixed assets or broadband of 12 million customers by 2028 and fiber optics of 20 million by 2028 is we're online for that. Reported service revenues in US dollar under US cap increased by 9.1%. That's service revenue to EUR 18.2 billion. That's an increase of $1.52 billion. Looking at postpaid service revenue, it grew by 11.8% year on year. Core adjusted EBITDA under US cap, and this was due to several factors, increased by 5.6% in the third quarter. That's an increase of $460 million. Here you can see the metrics on the chart here. How do you explain this? It's once again the same drivers as usual.

Significantly higher revenue per account and increased profitability. The revenue we make from customers on all customers increased by 3% year on year to $149.44. Revenue per postpaid phone customers increased by 2% to $50.71. You see a significant difference between prices you can achieve in the U.S. compared to in Europe. This brings me to the business in Germany. I'd like to start with the broadband market. There's not a whole lot of new things I can tell you here. Once again, the market growth is very slow, sluggish. We see strong competition and increasing customer growth among alternative network operators. The number of broadband lines in our business declined by 25,000 year on year. Previous year, in fact, we grew by 38,000. We don't expect any change in this trend in the near future.

We are trying to counter this by increasing our monthly revenue per broadband line. We have been successful so far, growing 3.6% year on year. We have increased prices here to compensate for the decline in number of customers, but we could not do that completely. All in all, we see that we have 5% more customers with connections, high-speed connections. That is a penetration of 54% or 8.1 million customers. FTTH is a great development. We had a record quarter here, increasing by 155,000 customers in the third quarter. That is an increase of 18%. The penetration that Tim just mentioned has risen from 14.6% to 16.1%. We are still not satisfied with that. The FTTH line increased by 41% year on year to 1.9 million. The investment in fiber optics is paying off. It is fast enough. We wish it could go faster, but the trend is in the right direction.

In the TV business, we won 27,000 net adds. That's significantly lower than the previous year. In the previous year, we lost the Nebenkosten privilege. That's a privilege for property owners to pass on cable TV and internet service fees to tenants. Also, the UEFA European Championship was on Magenta TV last year. In the mobile business, we had net adds at 314,000 in the third quarter, down from 327,000 net adds in the same quarter of the prior year. This is comparable to our competition, which reported minus 750,000. The mobile telecommunications market, we're well positioned there, and especially thanks to our next Magenta charge rates. The churn rate is constant and low, 0.8% in the third quarter. That's even a slight improvement year on year, where we were at 0.9% with the churn rate.

Service revenues on an organic basis in Germany grew by 0.4%. Mobile service revenues increased by 1.8% in organic terms. We are online with our guidance that we communicated to the capital market. This brings me to the fixed line network. In organic terms, the service revenues fell by 0.3%. There are three main drivers here. First, we had very strong B2B growth in the third quarter of 2024. In this year, it was just the opposite. We have a relatively weak B2B result in the third quarter, mainly due to difficult economic circumstances, which you can read about everywhere. A sharp increase in insolvencies this year. Once again, continued decline in IT revenues in the Germany segment. This has led to a weak B2B business for us.

This also is accompanied by the other two trends I cited: weaker broadband business and weaker wholesale business. In sum total, broadband increased by 2.1% year on year. Our guidance is between 3-4%. Wholesale access revenues are pretty much flat in the third quarter after an increase of 3.6% last year. Here, once again, we have a stable wholesale revenue that we have forecasted for the—and that is what we said last year at the Capital Market Days and forecast that. Going to the total segment, total reported revenue declined by 1.8% to EUR 6.3 billion. There were two main effects here. Last year, we had the UEFA European Championship and also continued terminal device business in Q3 this year. Reported adjusted EBITDA AL grew in the third quarter. Here for Germany, it was not unexpected, but it is slightly disappointing: 0.1% to EUR 2.7 billion.

That's a growth of 0.1% in organic terms. This is, for the most part, due to what we've already talked about, the effects for the last quarters. We have the wage increase from October 2024, and the monthly wage increase that we've had for employee salaries this year as well has gone into effect, and that has had a downward effect on EBITDA. In Q4, we expect EBIT to rise significantly above 4% again. This brings me to Europe. Europe is very solid. It's growing, and it's growing in a very robust way, continuously. Mobile contract net adds stood at 129,000. This is adjusted to take into account Romania and the divestiture there, where 60,000 active customers were subtracted from this. Broadband net adds stood at 57,000. FMC net adds remained stable against the prior year at 143,000, while TV net adds stood at 38,000.

Total reported revenue was up 2.2%, organically 3.3% year on year. When we break this down to fixed line and mobile, we see that mobile and fixed line service revenue was significantly above the 3% to almost 4%. That explains the service revenue increase in some total of 3.3% year on year. Reported adjusted EBITDA AL in the third quarter rose by 4.6% to EUR 1.2 billion. Organic growth was at the same level. We do not take into account exchange rate effects there. We are on the way to meet our forecasts at the Capital Market Days of growth between 4-5%. This brings me to T-Systems. Its order entry in Q3 was up 3.7%. T-Systems reported revenue rose by 2.3%. The drivers remain the same: the digital business, the road charging business.

In contrast to the German segment at T-Systems, the public sector is becoming ever more important and supporting our business there. Reported adjusted EBITDA AL in the segment was up 23% to EUR 127 million. This is mostly a project business that is not as constant as the infrastructure business. In sum total, I am very satisfied with the development of T-Systems. This brings me to free cash flow and the key financial metrics and liabilities. Free cash flow dropped 9.2% year on year to EUR 5.6 billion. There are two main effects here. The first was we had a lower operative cash flow, and this was due to the weaker dollar that accounted for EUR 500 million. Plus, we had an increase in CapEx, especially in the US, where cash CapEx rose EUR 550 million. Because of free cash flow, that lessened this effect.

After nine months, the development was a growth of 6.8% in free cash flow. That helped that situation. Adjusted net profit was up 14.3% in the third quarter. That is an increase of EUR 2.7 billion. It rose to EUR 2.7 billion. This is supported by several positive effects. The equity result was supported by GD Towers. These were the main drivers that led the net profit to rise by almost EUR 295 million. Factors reducing adjusted net profit include M&A activities to a tune of EUR 7.9 million, US Cellular and Metronet, and also the increase in the share buyback, EUR 1.2 billion. On the DTAG share buyback also, and the dividend we paid at, as well as acquisition of spectrum for EUR 0.4 billion in Slovakia, as well as payment for extension of frequencies in Germany. That was EUR 200 million.

Also, the free—but this was counterbalanced by free cash flow and leasing. The ratio of net debt, excluding leasing, fell to 2.23 at the end of the third quarter. I should mention that, and this is very encouraging, we received a rating upgrade from Moody's from Baa1 to A3. We are very pleased about this, and we hope we can continue to receive rating upgrades. With that, I'll give the floor to Tim. Thanks, Christian. Let's come to our Q&A. You know the format. If you want to ask a question, you would help us a lot if you use the hands-up function of the Teams app, then we know that you want to ask a question, and we can invite you to the virtual waiting room. Just use the hands-up function, and then we'll see that you want to ask a question and can call on you.

You also have the option of using the chat function if you watch us via the stream and can hand in a question in this way. Now, based on my list, Henning Might is the first, but I can't see him. I can't see him on my monitor. Mr. Dyke, I can see Mr. von Davis. Let's start with him. Mr. von Davis, can you hear us? Yes, I hear you well. I hope you can hear me as well. Thank you very much for your interesting talk. I have a question on the FTTH business in Germany, which seems to be encouraging. I think you mentioned 16.1% as our take-up rate. You also mentioned the 14.6%. Was that the number of the past year or three months ago? How do you assess the 16%? What are you doing to boost that rate?

Maybe do you want to lower prices for fiber connections, maybe? The question about the way forward, what is your target? When are you going to reach 20%, 25%? What do people actually want? You said that broadband width is relatively low. What is your share of the new FTTH customers that go for 1,000 megabit? Another question, how is the sale going of your own AI Phone? Can you give us some numbers? Are you happy with that? How is the phone selling? Is it popular in the market? Let me start with the 14.6% that you mentioned. That is the penetration in September of the previous year, so 2024. The 16.1% is the penetration end of September 2025. This is the year-on-year comparison after 12 months. What are we going to do?

I told you that this is an encouraging development, but it's not enough. Of course, we want to accelerate penetration. That's why we're going to focus on fiber build-out, a special focus on single-family units, because we know that the take-up rate there is much higher than in MDUs. This is a strategic shift. The second topic, in the MDUs, we will do more kind of pre-connections irrespective of contracts so that people don't have to ask another time for a connection. Hopefully, this will drive up penetration. Of course, generally, I would wish a faster ramp-up of the fiber infrastructure because we believe that these two essential issues have led to higher investment and need to be accelerated. How many new customers do we want to gain? We said at the Capital Markets Day, we want to win 1 million new customers in 2027.

This is our target that we want to achieve. Of course, it needs to be seen against the background of the infrastructure that we have built. What is important to me is that the acceleration of new customers, new fiber customers, will go up quarter by quarter. You have seen that 155,000 customers this quarter has already been a record. You can see our investment in fiber is right, is paying off, but monetization is still too slow. I have nothing to add to that. Of course, we would hope that government helps us implement this in MDUs. Whenever we supply apartments, we should not pay these extra charges. We explicitly welcome the initiative of the Federal Ministry of Digitization so that everybody can use the infrastructure, which allows for more competition.

What should not happen is that we need to pay money for actually funding this infrastructure. Everybody should help us with this argument, really, because if that would actually happen, it would be another obstacle for us to clear. Now, moving on to your question about the AI Phone, we're very happy with the uptake. The iPhone is very popular with the middle segment, really, of customers, not just in Germany, but in the typical Android countries. You know that Germany is an iPhone market, high Apple market share, whereas the other countries in the European segment are very much Android-driven. The phone is on an Android basis. In the medium segment, it's very popular. What's also interesting is that customers are interested in Perplexity, for example. We seem to be the largest distributors of Perplexity outside the US, but also PixArt and ElevenLabs.

These functionalities are very much in demand. You can see there is a market where you can see people are getting closer to AI. What is also encouraging is the development in the portfolio of the tablet. We also have a tablet in the market, an AI Phone tablet that supports AI functions and that is significantly more affordable than the product of our competitors. We generally do not report the actual sales figures of terminal equipment. Bear with us for not going into this kind of micromanagement. Now, sales pitch. We have Black Friday coming up, and there will be an interesting offer connected to the AI Phone. Now, let's move on, Ms. Käsebier, and then Mr. Scheuer, the next one on the list. Ms. Käsebier, your question, please. Thank you very much. First question.

You said that you're using AI in different parts of your business. Can you give us some figures on the profit you're making with AI, maybe in T-Systems, for example? To what extent are you shifting your business focus to AI? Just a brief question. There was a headcount reduction in Germany recently. To what extent is this attributable to AI? Could you repeat your last question? Because we didn't hear it well. Headcount, you talked about headcount. Yes, I think 4.4% headcount reduction in Germany, if I'm correctly informed. To what extent is this related to AI? Let me start with your first question. AI, our use of AI. I don't think I need to emphasize how important AI is for telecommunications and for Deutsche Telekom and will be in the next few years.

There is no area, there's no process that is not changed by AI. This is not just about efficiency targets, but this is also about providing better service for our customers. I have just come from the Cyber Security Summit in Israel, also in order to protect the company better. We need to strengthen our resilience, our infrastructure. I do not need to tell you that this is about seconds, and you cannot really do that with humans. You need the corresponding systems to do that. We are using AI in terms of network monitoring. We are using it for our fiber build-out. We are using it or have used it for software development. We use it in customer service. I mentioned FragmentGenta and the chatbot, which more and more does scheduling and answers questions automatically. We also have an employee tool, which is very popular, more than 150,000 queries.

Agenta AI is our consumer offering, which we have launched in almost all our markets. The savings effects and the efficiency gains, for example, in mobile communications, we have 95% better troubleshooting. We have a 40% savings also in IT. 2.5 million calls were deflected thanks to AI. Also, capacity boost when it comes to developing products and marketing by 5%. I could keep talking about this for hours. You can see that our EBITDA has improved correspondingly against the trend in the market, against what our competitors are showing. It's not just due to AI, but it's also due to AI. I'm not calling this an AI efficiency gain. Of course, we look at the total picture, but we are getting more efficient. What we want to achieve is savings of more than EUR 1 billion. This helps us with the EBITDA and the profit.

I think we're on the right track, but I think we can do even more, although I've seen all the developments when it comes to AI agents. I think the day before yesterday, we presented the Guardian Angel that we presented at the Mobile World Congress for the first time, and we've launched this. To monitor the network using AI. Yes, you've also seen it in the CapEx reduction. We now have a CapEx reduction. Our costs per household for fiber connections, we've clearly lowered this. Why was this possible? Through automation and AI that we're now using for planning as well, for documentation and other functions. This is just the start. Of course, it will also lead to a planned headcount reduction that we've implemented in Germany already to some extent. The employment figures are going down.

Of course, this also is due to demographic effects. You will see some efficiency gains also in headcount, but this is not our major target to use AI to cut jobs. In some areas, we will also have to employ more people, for example, in IT and in sales support. Just think of people that we've hired to accelerate our fiber build-out, more than 100,000 people in homes connected, or the AI experts that we need in order to use these tools. All of this is also an opportunity for new employment in the business. Maybe back to the Guardian Angel, you could say that once you have such a system to monitor the network, you do not need any new employees then. It will help us also with shortages in the labor market of skilled labor.

Yes, when you look at AI, of course, we're going to use agents in the future, but we need better protection for this and better cybersecurity because these agent models, I mean, we will be attacked, of course. This requires additional investment in security, definitely. Let me move on to the question about T-Systems. Now, when it comes to T-Systems, I think what was your question again? The second question? Headcount development AI. Did I answer that question, Ms. Käsebier? Yes, you did. I don't want to keep talking. I was going to mention the infrastructure that we need, but 10,000 GPUs and the build-up of the AI factory will lead to a situation where we'll have our own services and infrastructure.

Our AST, so all the data we need to make a large language model available to all the employees that they can use to query the entire knowledge of the company, the end result will be that the answer will come up in 18 seconds and will not take more than one minute or so. This machine will be our own development, and this will help us with the GPUs and to have the necessary capacity utilization. We will continue with Mr. Scheuer and then Mr. Guiden. Mr. Scheuer, you go first. Good morning. I would like to come back to what you said about the AI factory. Could you tell us what importance will this have for your overall business? Overall, how much money are you investing in Munich and the Gigafactory? You said it's like a speedboat on the way to the Gigafactory.

We're talking about the group figures. Could you go into a little bit more detail and put it in the overall context? Do you think it would be a good idea not to pay out so much money in dividends and share buybacks when you have such an exciting new business area to invest in? The second topic is the market in Germany, and we see some major changes here. We have a new CEO at Telefónica Germany. You know him from GD Towers. What impetus do you expect this will provide the German market? Also, will you be successful in improving the broadband figures for the business? Will you achieve this 2-3% in your guidance that you announced at the Capital Market Days, or do you see a slump taking place here in the market? Maybe just briefly to the dividend.

I have to comment on that because the dividends, that's 3.5%, and that's at the lower end of the scale by European comparison. As a result of this, I think that's an adequate dividend for the shareholders. We have 1.3 million retail shareholders, so individuals. That's quite a bit. That's a large number. I think we really have to stay in line with the market. Also, the share buyback at Deutsche Telekom. We're doing this because we believe that our business outside the US is undervalued. That's why the return that we can achieve on this through this share buyback is about 8% return at the current share price, that is, which we think we can achieve. It's a very rational move to invest in our own share without really having a negative impact on our investment budget. Second topic, broadband right now.

We do not see any need to change our guidance there. We have a guidance of 3%-4% with broadband. We did not achieve it this quarter, but we think the guidance is for 2027, and we are sticking to that. The build-out strategy will lead to greater customer numbers, and we think that will help us monitor the fiber optic network better. With regard to Telefónica, I do not know what to say because maybe you can comment on that, Tim, because I want to see what the new Telefónica CEO does in Germany. As for this announcement, we will have to wait and see. We have a very strong competitive landscape in mobile and what is happening at Vodafone, but also aggressive offers from Telefónica. Also in the fixed line, the prices have, we have increased them by EUR 1 in the customer areas.

We think that the market will calm down here. We hope that people will see that we're exchanging value for volume. That's okay with us. Tim, maybe you want to comment on the Telefónica change and the CEO. I think that at Telefónica, we can expect rational behavior there. They're also investing in infrastructure. In the past few years, our industry hasn't been able to pass the inflation rate on to customers in terms of prices. That's the only industry that hasn't been able to do that. All other industrial sectors have passed on their increased costs to their buyers, their consumers. We haven't been able to. That's why the investment capability of our entire sector is limited. I expect some positive impetus also in terms of sales revenue per customer and prices in Germany. That applies to all the players, including Vodafone.

I can only speculate there. I think you see the pressure that Telefónica has been under. They are a very good partner of ours. Just look at broadband development. They market our infrastructure, our fiber infrastructure. Mr. Motta, their CEO, and I are discussing to what extent we can expand this marketing effort. I think that a good partnership like we had with Mr. Haas will be continued with Telefónica. I understand the financial economic difficulties they have after the one eye-to-eye customers went to Vodafone, but I cannot really help them there. We will continue to act rationally in the market and seek a partnership with Telefónica. Yeah, and AI, we have a total invest of EUR 1 billion in GPUs on the Blackwell architecture. About half of that is being invested by Nvidia.

Our investment share in the data center goes in the software, the connections, the security, also in the cloud infrastructure that we're providing for that. We expect sales revenue, in particular for T-Systems in that system and digital. Variable Hassan will be improved, the revenue intake. We will be pushing this under the rubric of sovereignty. I think we're providing an answer to the whole issue of sovereignty. There is a question of American chips, but the European and German infrastructure depends on that. As long as we do not have a factory, we have to rely on these other chips. Also, the second question relates to the public hand, and that stands towards the sovereign infrastructure. When the government says, "We'll put our data in there, we're investing in Germany, and we have a German solution," that will make a big difference.

I think that'll create an impetus. It will have a ripple effect on German medium-sized companies because what's at stake here is, as Mr. Jensen said, Industry 4.0 was a huge concept, but the step towards automation has been missing. Now we have the tools. Now we have the infrastructure. Now we can realize Industry 4.0. As I've said many times, in Israel we looked at all kinds of companies that showed how, through digital twins and robotics and automation, agent models, and all these have to be trained first to work effectively, how they've achieved huge boosts in productivity. That will be our task too in distribution and in the market in the next few months. Together with SAP, we're going to be rolling that out in the market. We're really optimistic that we have a solution for Germany.

If we see that demand picks up and we're able to make our customers satisfied, then we'll continue to invest in this. We're not limited by any expenditures in the capital market. You heard that with our dividend. You've heard about our debt ratio. We have a good investment rating as a group. We have a very strong free cash flow, which is, of course, boosted by the US. We'll continue to work on the Gigabyte factory full steam ahead. Of course, we want to sell it, and it would help us to get the government behind us there. This investment is in the double-digit billions. We'd be happy with any help we can get, and we'll work with partners because we want to have a secure footing for this. Distribution and marketing will be mostly in the domain of Deutsche Telekom.

That will be the next big step that we take. We're planning that internally right now. As soon as we have something solid, we'll inform you about how we want to carry on with our investments. I think in the next two or three months, we'll know a lot more and can come back to you on that. I hope, Mr. Scheuer, I was able to answer your question. I think this is a huge opportunity for Germany. Next week, with Macron and Meretz at the Digitalization Summit, I'll give a presentation on this. We shouldn't just complain about things. We should talk about what we are doing right now, especially here in Germany. Let's briefly wrap this up with the next question. Mr. Bücken is next on the list. Good morning, Mr. Höttges.

I'm not going to ask a fiber question and comment on the take-up rate, but the BOS, are you going to talk them out of their own broadband investment? Could you comment on Team Mission generally, what you want to achieve? Great question, Mr. Bücken. I remember the criticism. Only Vodafone is building the only real 5G network. That was standalone 5G SA. Now, today, Deutsche Telekom has the only countrywide 5G SA network that we can offer here. The only countrywide 5G SA network. SA is an opportunity to offer a slice with SA. We can enable Team Mission because the security authorities, we can give them a chance to have an always available secure system channel with high 5G capability. We can also save taxpayers' money because the federal government doesn't have to build its own network.

Other governments are doing that, like the United States. It's police authorities like in New York and others. Or look at the U.K. Something similar is happening on the BOS infrastructure. Now, the intention, apart from the difficulties, to build a network for mobile communications by the government or so is, I think, completely unthinkable. The only alternative is to use BOS technology as quickly as possible. With 5G SA, we have provided to government authorities not just the speech access, but high bit rates that they can use for videos and other content. This offering is really something that we've highlighted. It's in the shop window, as it were. I've talked to the Federal Chancellor. I've talked to representatives of the federal government. We've presented it to them. We've presented it to police authorities, but also hospitals and disaster relief agencies.

Because in an emergency, and I'm not talking about a war, but other emergencies, we need a safe sharing of data and information. This product is finished and ready to be used. We can introduce it very quickly. It is based on a highly encrypted infrastructure in a cloud, which is under government supervision. We guarantee network stability and resilience in this infrastructure. By now, with 5G, we have 99% coverage, so high security standard. We do not need to build a new network. Team Mission can replace the BT BOS infrastructure, yes, faster, more cost-efficiently, and it is available right now. If you look at the high investment that we need in Germany now in infrastructure, this would be a very cost-efficient option for the federal government. Deutsche Telekom is a big player here, of course, in the German market.

We are absolutely capable of doing this. Hopefully, we can convince the government. You said you're not talking about fiber, Mr. Bückner, but let's mention fiber anyway, the complex situation. You said you have a customer case where it took a long time. I mean, we actually tracked that. The customer now has a fiber connection. Why did it take so long? Because it was a multi-dwelling unit, and the in-house connection was difficult. We went through the chimney in that house. The permit that we needed from the chimney sweep took long, and that's why it was delayed so much. This is the reality of fiber connections in Germany. In other countries, you just go through a wall, and then you have the connection. It's not that easy in Germany. We're happy that we could offer that to the customer in Hamburg.

Mr. Gaid is next on the speakers list. Good morning. Part of my question has already been answered. At the Capital Market Day, it was said there are three network operators in the US, in China, and 38 in Europe. Will there be any changes in Germany? Will we be down to two networks or two and a half networks in Germany in the future? Mr. Söder is happy about the AI factory in Munich, but you're relying very much on Microsoft Teams right now. Shouldn't you work on a German solution also? Thank you very much. I can't speculate on market consolidation. You know that we drove the consolidation here in Germany. If we try to take over anybody in Germany, I think the antitrust authorities would look at this very critically.

European market, intra-market consolidation is much more strongly felt with the Orange and Telefónica and other competitors. I understand Mr. Mottes' target. If you want more investment capability, like in the U.S. and our markets, our entire success story is based on this, really. Then he will have to try to realize economies of scale and other cash advantages. His strategy and what he wants for the U.K. or other markets, I think, is absolutely plausible and is right. Deutsche Telekom currently is not in a situation where we need to consolidate or can even consolidate because we've either sold our stake in markets or have done consolidation within markets, and we can't really move any further within Germany. The cards are really on his table.

I think if you look at the German market, it would be good for the German market if we had some more consolidation. Mr. Gaik, I'm really, really mad at. Sometimes I wish I could manipulate you. Why don't you write about this in the press? We had a very expansive action on the 3.5 gig spectrum, and we basically generated some competition. We took 100 megahertz out of it, and these 100 megahertz are not used at all. I mean, we're all citizens of this country. How can it possibly happen that the 100 megahertz spectrum that's used for campus networks or the industry are not used at all? The second spectrum was sold with high asymmetrical conditions to a competitor. This spectrum is not used either. Two hundred megahertz of the spectrum are only used by two competitors.

This is an artificial narrowing of the supply side. It is not consistently implemented in Germany, and then we're mad at each other. I would wish a different implementation of the general welfare, really. I think this is the perfect cue for our next speaker, who has written an article on this recently. Ms. Kuzman, your question. Thank you very much. I'm more interested in the use of your network by the police and the federal armed services if they were to invest in this. This very much depends on Huawei. Now the government seems to be moving now because they have passed legislation now. The Federal Ministry of the Interior will have the authority on these decisions because these networks are considered to be critical infrastructure. My question, are you preparing for this?

That Huawei will be excluded from the German market here, from this network? How do you like the Nokia solution that is already used in parts of the network? What do you expect the costs to be like? How can you cushion the effect from the cost? First of all, we do not want to speculate on this right now because these things come and go. Of course, we have to do long-term investments here and there. At the time, in order to be legally secure, we talked to the previous federal government and signed a legally binding agreement. Now, this agreement costs us double-digit millions because we are now about to replace the original software with new software. This control software, we are making progress, and we are investing a lot of money in order to get this right.

At the same time, we have 3,000 O-RAN locations that's being implemented right now. What we see from Nokia right now is very promising. We are really happy what Nokia is doing right now. We are looking at the testing now. We see the first usages now where customers can already use this. This is also on track, and this is giving us additional autonomy. Now, third aspect, we are not seeing any restrictions or security risks by having an antenna somewhere out there in the infrastructure. That does not pose any kind of security risk. All these optical networks, the connection networks, and the core network architecture where a signal turns into information, all of this is free from the Chinese already. At this point, I do not see any security risk also when it comes to using federal networks or police networks.

There are also other countries in Europe that have already their BOS architecture on the basis of Chinese antenna. Now, this is a matter issue, really, but there are no details or any kind of technical arguments that would confirm this. Of course, we always have a plan B. If there is the legislation to that effect, the question is, do we want this? Billions of investment in just a conversion of the network by not having the most modern technology, but only having to do the conversion. Do we want the infrastructure and service providers to deal with the removal of such antenna? Of course, we will always stick to the decisions that are taken by the government in Berlin. I think the path that we've chosen right now and agreed with the federal government right now is the better option.

Yeah, that brings us to the end of the Q&A. I would like to bid farewell to everyone. We've had several press conferences today from different companies on their metrics on the third quarter. Thank you for our colleague who is going into retirement from the press and how you've critically followed us for the years. All the best in your retirement years. Thank you for dialing in today and asking your questions. Bye, Mr. Kolniewski. All the best in retirement. Bye-bye from Bonn.

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