Deutsche Telekom Raises Guidance for Third Time This Year; All Regions Perform Well; Maintaining FVE

Deutsche Telekom is set to close a good 2021 as it raised its EBITDA and free cash flow guidance for the third time this year. We believe management has been setting a conservative guidance outlook and raised it as the execution played out. The company now expects EBITDA (after leases) of around EUR 38 billion and free cash flow of around EUR 8.5 billion compared with previous guidance of “at least” EUR 37.2 billion and EUR 8 billion, respectively. Management also raised its 2021 synergy guidance for the acquisition of Sprint and now expects synergies of EUR 3.2 billion-3.5 billion, compared with EUR 2.9 billion-3.2 billion before. Deutsche Telekom raised its dividend from EUR 0.60 per share to EUR 0.64 for the year, which we see as a reasonable capital allocation decision, considering the company’s sustainable dividend policy and given the improved 2021 results. We are maintaining our EUR 17 fair value estimate.