Düsseldorf Timotheus Höttges has literally reached the top. The CEO of Deutsche Telekom holds on to a radio mast on the roof of the company headquarters in Bonn and hangs up a star in the company color magenta. “In Germany we are now light years ahead Vodafone in the expansion of 5G, ”says Höttges in an elaborately staged telecommunications video at the end of 2020.
Since then, the stock market valuation has risen by more than 25 percent. T-Mobile is currently valued at more than 154 billion dollars (127 billion euros) on the stock markets. The parent company Deutsche Telekom is currently worth 71 billion euros on the stock exchange. The US subsidiary, in which it holds 42 percent of the shares, contributes more than half of the Group’s sales.
The Telekom still has the home country in the group name. However, it has changed its focus significantly towards the USA. Now Höttges is exploring new perspectives for the company in Europe. The most important man for this task in the group is CEO Thorsten Langheim. In addition, Höttges brought the Belgian telecommunications manager Dominique Leroy into the company as the new European head in November.
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Both should develop a future plan for Telekom in Europe. In order to understand the current status, the Handelsblatt has spoken with around half a dozen decision-makers within Telekom and with industry experts over the past few weeks.
Netherlands: From problem case to growth market
Langheim isn’t just the architect of the merger in the US. He had also succeeded in transforming the ailing business in the Netherlands into a growth market. While Telekom had to compensate customers there a decade ago due to the poor network quality, the T-Mobile network was recently named the best in Europe in several tests.
The Netherlands formally belong to Thorsten Langheim’s “USA and Group Development” board division. The other European national companies fall under Dominique Leroy’s area. There are some construction sites there.
The first problem case is the subsidiary in Romania. Business there has not been developing well for Telekom for years. Tried through the daughter OTE the Dax-Group transferred the fixed-line business in Romania to the French network operator Orange repel.
However, the Romanian state is also involved in the fixed-line business, so the ongoing discussions are difficult, as Handelsblatt learned. In the long term, Telekom is also striving to part with the mobile communications business in Romania.
The second problem market is Poland. Business there is also developing slowly, and there is no improvement in sight for the time being. The French telecommunications company Iliad of billionaire Xavier Niel, known for its competitive prices, received permission from the EU competition authorities to take over the Polish network operator for 3.5 billion euros.
Dominique Leroy’s task will be to expand the business in Europe. At the same time, the question is how the business can be expanded further. “Telekom behaves like a sedate elephant in many markets,” complains telecommunications consultant John Strand. Only in the US and Netherlands markets does the group appear customer-oriented and aggressive.
Before Telekom can mobilize large sums of money for mergers or acquisitions in Europe, however, two costly problems must be solved. In Germany, the group delayed the expansion of future-oriented fiber optics for a long time.
Two expensive challenges in Europe and the USA
With a technically improved DSL broadband connection, Telekom can offer speeds of up to 250 megabits per second (Mbps). Competitor Vodafone brings it with its cable network in many places to 1000 Mbps. Höttges had announced a fiber optic initiative and made the former European boss Srini Gopalan head of Germany and thus the most important man for fiber optic expansion.
Officially, it set the goal of connecting two million households a year with fiber optics. Internally, he even formulated three million households as a target. Due to limited construction capacities and lengthy approval procedures, this is a major challenge. “For years, Telekom has not invested enough in the infrastructure in Germany. That’s taking its toll today, ”said consultant John Strand.
The second, expensive challenge is participation in the US. Business for T-Mobile US is doing very well. But Telekom has only owned 43 percent of the shares in the company since the merger in April. Due to a voting rights agreement with the former Sprint owner Softbank Telekom can exercise voting rights over around 67 percent of the shares.
Softbank had committed to a lock-up, so it is not allowed to part with a large part of the shares for four years. Time is running out for Telekom. You would have to buy the shares in Softbank by 2024 if you don’t want to slide below a threshold of 51 percent and thus maintain control over T-Mobile in the long term. Just like the fiber optic expansion, however, this will cost a lot of money.
In return, Telekom could want to part with businesses in Europe. For the subsidiary in the Netherlands, Telekom is currently considering separating from the entire company or only parts. At the same time, Telekom has merged its mobile communications sites in the Deutsche Funkturm subsidiary. An IPO is also being considered here. Competitors Telefónica and Vodafone had taken similar steps.
More: The decision on the future chief controller should be made at the Telekom general meeting. But favorite Harald Krüger suddenly refuses. Now the search starts again.