Telefónica Deutschland to invest several billion euros into its mobile network by 2022:Additional CapEx heralds growth phase and start of 5G era

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-5G network to start in 2020 in cities; rapid nationwide expansion of LTE to continue
-Company aims to increase revenue by a total of at least 5 percent by 2022
-Management Board proposes dividend of at least 17 euro cents per share from 2019 onwards
Credits: Telefónica Deutschland / Bernhard Huber
CEO Markus Haas (center), CFO Markus Rolle (left) und CTIO Mallik Rao (right)
Telefónica Deutschland plans to accelerate its growth significantly in the coming years. Between 2020 and 2022, the company intends to increase its revenue by at least 5 percent overall while further increasing its profitability. As a basis for growth, an additional several hundred million euros are to be invested in network expansion. To date, Telefónica Deutschland has invested around one billion euros annually, most of it into its network. The company will invest around 17-18 percent of its revenue in the next two years to enable the nationwide expansion of LTE and the rapid establishment of a high-performance 5G mobile communications infrastructure. After a strong increase in network performance in 2019 and obtaining the rating "good" across three current network tests, the additional investment will help the company to offer its customers an outstanding network experience for all relevant fields of application.

Further improvement of the network for stronger growth

Credits: Telefónica Deutschland / Bernhard Huber
Markus Haas
"With the new decade and the launch of 5G, our company is entering a growth phase," said Markus Haas, CEO of Telefónica Deutschland. "We are going to invest more to capture market share, particularly in rural areas and with business customers, where a high-performance mobile communications and fixed-network infrastructure will be a great asset." Telefónica Deutschland will continue its network expansion program beyond 2019, singular in scale in Europe, in urban and rural areas in the coming year. Thanks to the additional investment funds, the company will be able to accelerate the grid expansion even further from 2020 onwards. This will make sure that millions of consumers in Germany can enjoy an ever-better network and that they can start into the 5G era.

Grid start for 5G already in 2020

In the cities, Telefónica Deutschland is focusing above all on densifying the network and providing additional capacity. In parallel to the LTE expansion, the company is starting to build a 5G network that will enable private and business customers to achieve higher speeds, more capacity and intelligently connecting of their digital devices in the future. In this way, the company intends to meet the steadily growing demand for mobile communications data and defend its urban market leadership.
By the end of 2022, 30 cities with a total population of 16 million will be served.
According to current planning, the expansion of the new 5G mobile communications standard will begin in the first quarter of 2020, so that customers will be able to benefit from the new technology in the coming year already. The 5G expansion will start in the five largest German cities of Berlin, Hamburg, Munich, Cologne and Frankfurt and should be largely completed by the end of 2021. By the end of 2022, 30 cities with a total population of 16 million will be served. Telefónica Deutschland thus intends to offer its customers a high-performance 5G network with corresponding coverage in the most important German metropolises. With its core brand O2, the company is the clear market leader in urban areas with market shares of up to 50 percent. This is why a large part of its core customer base stands to benefits so quickly from the 5G expansion.

Continued intensive LTE expansion in rural areas and strong fixed network infrastructure

The company will continue the intensive expansion of the LTE infrastructure in rural areas
In rural areas, the company will continue the intensive expansion of the LTE infrastructure in order to gain additional customers and market share and at the same time create the technical prerequisites for the future 5G expansion. In the coming year, Telefónica Deutschland plans to set up or expand more than 10,000 LTE elements, thus exceeding the pace of the previous year once again. By the end of 2020, 99 percent of households throughout Germany will be able to surf at high LTE speeds. In order to be able to expand network coverage as quickly as possible, Telefónica Deutschland is relying on cooperation with its competitors. In addition to plans with Deutsche Telekom and Vodafone to jointly develop 6,000 mobile communications sites, Telefónica Deutschland is currently in talks about further opportunities to make network expansion more commercially attractive.

Company wants to gain market share in business customer segment

In addition, the company has secured a strong position in the fixed network. With access to the Vodafone and Tele Columbus cable networks and Deutsche Telekom's VDSL infrastructure, Telefónica Deutschland can provide more households with the best available broadband connection than any other provider. This enables the company to offer its customers the most suitable technology for their circumstances. With this strong infrastructure behind it, Telefónica Deutschland will generate additional revenue. On the one hand, the company wants to win additional customers in rural areas. On the other hand, attractive convergent offers from mobile and fixed network components will generate additional revenues. Finally, Telefónica Deutschland intends to achieve an appropriate market share in the business customer segment, where it is currently underrepresented.

Growth ensures appropriate shareholder remuneration

With the help of these measures, Telefónica Deutschland plans to increase its revenue by at least 5 percent by the end of 2022 and at the same time increase its OIBDA margin. For 2019, the company's Management Board intends to propose a dividend payment of 17 euro cents per share to the Annual General Meeting. This should also remain the minimum during the investment phase. Thus, despite high investments in growth, an appropriate shareholder remuneration is ensured.

Strong partners for network expansion

For the 5G network, Telefónica Deutschland will continue its established and successful strategy of working with several manufacturers. In this way, the company will maintain diversity in its networks and avoid dependencies on one provider. Telefónica Deutschland plans to rely on the proven strategic partners Nokia and Huawei to set up the 5G access network (Radio Access Network). This collaboration with Huawei and Nokia to build a 5G network will be subject to successful security certification of the technology and the companies in accordance with German law. Telefónica Deutschland is thus taking account of the political process of establishing these security guidelines, which has not yet been completed, without delaying the start of the 5G expansion. Nokia and Huawei will be equally responsible for equipping the mobile radio sites with modern 5G antenna technology. Telefónica Deutschland will offer the new mobile communications standard in the O2 network to both private and business customers in Germany in the shortest possible time through a targeted user-oriented structure with state-of-the-art 5G technology. The company is expected to decide on future technology partners for the mobile communications core network in the coming year.