Deutsche Telekom reveals cost cutting strategy aiming $1.75 bn

Deutsche Telekom today revealed strategy to cut costs by 1.5 billion euros or $1.75 billion by 2021.
Deutsche Telekom network Europe
The global telecom operator, which has presence in Europe and the U.S., will be making more investment in automation and digitalization tools to reduce indirect costs outside of the United States. Deutsche Telekom’s T-Mobile US business unit is in the process of buying Sprint in the U.S.

Around a half of these cuts will be from non-staff-related savings in areas such as real estate and legacy IT platforms. Some of the cut in costs will result from the migration to IP by 2019 in Germany.

The majority of the planned staff-reduction measures have already been implemented by way of agreements – such as the one for phased retirement – that will take effect at the end of the current year, Deutsche Telekom said at its Capital Markets Day in Bonn.

Deutsche Telekom said its revenue is expected to increase by 1 to 2 percent per year in the period from 2017 through 2021, adjusted EBITDA by 2 to 4 percent, and free cash flow by 10 percent.

“Over the next few years, we will continue to exhibit a growth profile that is unparalleled in our industry,” said Tim Hottges, CEO of Deutsche Telekom.

Deutsche Telekom’s capital expenditure (Capex), outside of the United States, will remain virtually on a par with the high level seen in 2017.

Deutsche Telekom’s fiber-optic infrastructure is expected to cover 80 percent of households in Germany by the end of next year. Deutsche Telekom’s investment in vectoring technology will ensure that around 70 percent of households will have access to bandwidths of at least 100 Mbit/s by the end of 2019.

Deutsche Telekom will also begin rolling out super vectoring in the second half of 2018, and expects to be able to offer some 15 million households surfing speeds of up to 250 Mbit/s, but at least 105 Mbit/s, by the year end.

Deutsche Telekom said its fiber-to-the-home (FTTH) will reach up to 2 million households a year. Wireless-to-the-home technologies will provide gigabit bandwidth to around one quarter of German homes.

Deutsche Telekom’s European subsidiaries will triple the share of Capex allocated to FTTH while overall investments will remain stable.

Deutsche Telekom will increase the number of mobile base stations in Germany from 27,000 in 2017 to 36,000 in 2021. It will deploy small cells to increase capacities in urban areas with heavy network traffic.

Deutsche Telekom aims to increase its LTE network coverage in Germany from 94 percent of the population in 2017 to 98 percent in 2019.

Deutsche Telekom’s European subsidiaries will increase the number of base stations and small cells to 47,000 by 2021 from 41,000 in 2017.