Deutsche Telekom Meets Its Medium-Term Targets; Cash Generation To Be Stepped Up in 2023

Deutsche Telekom followed its habit of underpromising and overdelivering. It closed 2022 by beating its own guidance, which had already been raised several times during the year. Management reviewed its track record since 2018, highlighting that most targets have been achieved or surpassed. Since 2018, group service revenue has grown at an annual rate between 1.6% and 3.7% organically with adjusted EBITDA after leases growing in the 4.2% to 7.9% range annually. When excluding the U.S., Deutsche Telekom’s growth engine, adjusted EBTIDAaL has grown at a 2.4% to 4.8% rate annually, a performance that pleases us. Deutsche Telekom shares have had a very strong performance in the past year, beating indexes like the S&P 500 and STOXX 600, and are currently trading at around EUR 21 per share. We maintain our EUR 23 fair value estimate and remind investors that Deutsche Telekom has a narrow moat rating and an Exemplary Morningstar Capital Allocation Rating.