Q3 FY21: Forager DT ‘hogs’ an extra billion in earnings

Deutsche Telekom’s (DT) latest quarterly results presentation, for the three months to 30 September 2021 (Q3 FY21), saw the Group continue to scale out its increasingly sizeable TransAtlantic growth platform, and set the stage for Chief Executive (CEO) Timotheus Höttges to amp up his own levels of passion and theatricality.

Quarterly updates under the increasingly freewheeling CEO almost never fail to entertain, but Q3’s must have left some analysts wondering whether they were being treated to a bit of an early Christmas panto.

The bright design of DT’s presentation room, and relentlessly upbeat nature of Höttges and his team, could not have contrasted more palpably with the humourless and stuffy displays of many of his European counterparts — even at a time regional telcos appear to be gathering in confidence.

Winning ugly

Progress in the USA continued to drive the Group’s expansion during Q3, but it was the topic of efficiency gains at DT’s more sedate Europe-side businesses where Höttges was most animated. He delighted in the fact that the Group has now grown earnings for a 20th quarter in a row in Germany, and a 15th in Europe. “Our flying wheel is still very strongly working”, he exclaimed.

Delving into the nature of how DT is seeking to sharpen up, and counter new, nimbler challengers such as Germany’s re-morphing 1&1 Drillisch, the CEO got creative. “Forme”, he said, “thisis a little bit ‘the fairy tale of the hedgehog and the rabbit’”.

DT was the “hedgehog” in this story, which appeared somewhat similar to the narrative of Aesop’s Tortoiseand Hare, and Höttges’ message was that it was well set to win in the DigitalTelco long run, gathering endurance with the changes being made to how it operates internally. “This ugly, small hedgehog —DeutscheTelekom —will find its way”, he asserted.

Deutsche Telekomwatch is not sure if the analogy completely fitted, but it was instructive to see Höttges framing delivery of the Group’s Leading DigitalTelco push as a long-term play, and one where rivals will grab early headlines.

M&A-based gravity shift

In more serious sections of the presentation, Höttges was keen to talk up the progress DT has been making on M&A during a particularly heavy period of activity for his top team. The Group continued to frame its corporate deal-making strategy as a “capital allocation” improvement exercise — evident code for DT’s preference for the USA over Europe as an investment destination, and its increasing Germano-American nature.

The strategy has been reflected this FY in numerous deals, including steps DT is taking towards regaining a majority of T-Mobile US (TMUS), while recruiting private equity backing for fibre rollout in Germany, and exiting or restructuring European businesses such as T-Mobile Netherlands, Telekom Romania, and, prospectively, T-Systems and towers (Deutsche Telekomwatch, #106–#108, and see separate). “Ilike speed”, declared Höttges, noting “bigprogress” on key corporate initiatives.

“ You know that I’m always criticising DeutscheTelekom for sometimes being a little bit slow. But I have to admit that, this time, I’m very surprised how many things were able to be executed just in this few months.”

Höttges.