Telekom keeps investing ‘more than competitors’ 

“We will continue to invest significantly more than our competitors in network infrastructure and services, aiming to deliver top speeds, user experiences, and reliability. This is how future performance is built,” explains Christian Illek, member of the Management Board for Finance at Telekom, the parent company of Greece’s largest mobile network operator Cosmote, during an exclusive interview with Kathimerini in Athens as part of a scheduled business visit.

“We are optimistic about Greece’s prospects and are very satisfied with our investment here,” he notes, highlighting that Cosmote “is very important to our portfolio.” As he mentions, Cosmote ranks third in operating profit contribution within the group, which operates in more than 50 countries globally, after the US and Germany. Telekom serves nearly 300 million customers across 50 countries and employs over 200,000 people, primarily in Europe and the USA, and in 2023 generated revenues of €112 billion with operating earnings (EBITDA AL) amounting to €40.5 billion. Illek is particularly satisfied with Cosmote’s performance, which achieved a capital return of 12.1% in 2023 and has set a goal to exceed 15% by 2027.

He refers to new partnerships, such as the recent one with Netflix, and expresses readiness to assist SMEs and the public sector in starting or accelerating their digital transformation. He points out the structural issues of the European telecommunications market compared to that of the USA and explains how Telekom utilizes AI technologies to enhance service speeds on its networks.

What are the group’s development plans for the next three years?

We just presented our midterm plans at our triennial Capital Markets Day [on October 10 and 11]. There are many factors driving the acceleration of our growth. At the heart of our DNA and our recent successes is what we call our “flywheel.” We invest more than our competition. That leads to superior networks. Superior networks lead to superior customer experience and in turn market share, and, combined with efficiency targets, an ongoing focus within the company, result in superior financial outcomes, which are reinvested into the business. This applies to all our markets, whether in Germany, the US, or Greece. While we achieved strong financial results, we invested in the foundations for our future growth. With the best networks in all our markets we are well positioned for our planned growth acceleration. In addition, we will leverage the multiple opportunities arising from AI and digitalization. We believe this will drive significant efficiencies and a better customer experience.

How do you evaluate your subsidiary Cosmote’s performance in Greece and the country’s outlook overall?

Cosmote strategy is very much aligned with Telekom’s strategy. We over-invest to provide the biggest and best networks in Greece, to drive Greek society into the gigabit era – especially with FTTH (Fiber to the Home) and 5G. The management team is highly dedicated to this mission, and Cosmote is the undisputed leader in both 5G and fiber-optics. In FTTH, we have already surpassed 1.5 million households and businesses, targeting 3 million by 2027. In 5G, we cover over 99% of the population and have already launched Cosmote 5G+, the first stand-alone 5G network in Greece. We are optimistic about Greece’s prospects and very satisfied with our investment in the country. Cosmote is very important to our portfolio, and bear in mind that it ranks third in adjusted EBITDA AL contribution within our global footprint.

What is the budget of your medium-term investment plan in Greece, and what does it include?

I cannot provide specific details about the group’s capital allocation strategy. However, I can tell you that Cosmote has been the largest investor in telecommunications infrastructure and new technologies in Greece over the past decade. We have designed a €3 billion investment plan in fiber-optic networks through the end of 2027, while our 5G coverage will remain the top in the market.

Telekom’s scale allows you to make deals like the recent one with OpenAI in the US and Netflix in Europe, which was launched in Greece by Cosmote TV. Can we expect more such moves?

Our scale gives us unique opportunities to bundle partnership efforts more effectively than anyone else. Partnering is integral to Telekom’s success. We aim to provide the best and most innovative products and services. This requires a strong collaboration with partners who are leaders in their respective fields – just like we are in telecommunications. Google, Apple, SpaceX, Perplexity, OpenAI, Nvidia, and Netflix are just a few examples I can mention. By utilizing the collective strength of our group and our partners, we continue to develop industry-leading products and services that inspire our customers today and in the future. This applies to all the countries where we have a presence, including Cosmote and our Greek customers.

‘We have designed a €3 billion investment plan in fiber-optic networks through the end of 2027, while our 5G coverage will remain the top in the market’ 

Small and medium-sized enterprises in Greece have relatively moderate levels of innovation and low digital maturity. Given that they form the backbone of the Greek economy, do you see opportunities in this area?

Across all our markets, we observe SMEs divided into two categories: those that embrace digital technology and those facing challenges with its implementation. The same holds true in Greece, where the integration of advanced digital technologies such as IoT (internet of things) and AI (artificial intelligence) among SMEs is still rather low. But this simply means there are significant opportunities. Cosmote has showcased several projects that it can effectively contribute to the digital transformation, especially in the Greek public sector. Through providing best-in-class services in cloud, cybersecurity, and AI, supported by our state-of-the-art fixed and mobile networks, Cosmote is perfectly set to help Greek businesses, from very small ones to large enterprises.

How do you plan to leverage emerging technologies like artificial intelligence, edge computing, and the cloud?

We are very focused on leveraging these opportunities. Let me give you some examples. We use artificial intelligence to predict customer behavior and adjust network capacity accordingly. This allows us to provide efficient and reliable connectivity. Furthermore, AI enables highly personalized services for everyone. In Germany, the time required to process a new FTTH (Fiber to the Home) application used to be 300 seconds. By developing an AI engine, we reduced the time to nine seconds. So, we must make artificial intelligence practical. On the other hand, edge and cloud computing allow us to adapt our networks to a changing environment, by reducing latency, enhancing performance, and increasing security. Also, this network architecture allows us to scale our network faster and more efficiently than in the past. We have cloudified most of our workloads, and we are already seeing the benefits.

Those involved in telecommunications observe a significant lag in the European market compared to the United States. What needs to be done for Europe to regain its competitiveness?

As Telekom, we have a strong presence on both sides of the Atlantic. Two markets that could not be more different: On the one hand, the US is a homogenous market, with one jurisdiction, over 300 million residents served primarily by three providers, and an investor-friendly environment. On the other hand, we have the highly fragmented European Union, where approximately 450 million residents are served by a large number of providers. We have European regulation, we have national regulation and all that results in a complicated framework. In his report “The Future of European Competitiveness,” Mario Draghi provides in-depth analysis of the competitive situation in Europe. He also provides recommendations how Europe can catch up with the United States and other countries. This includes specific recommendations for our industry, such as reducing bureaucracy, and fostering a more investor-friendly environment.

You have the largest FTTH and 5G networks in Europe. However, there are concerns regarding the return on investment (ROI) for your sector. What is your view, and how long do you estimate it will take to see a meaningful return on investment?

Unlike most telecommunications providers, we have been able to earn our costs of capital in all our markets. We expect our returns on assets to improve further in the coming years. That said, FTTH clearly has a long-term return. Especially in Germany, where costs are high, and we already have a high-quality copper-based VDSL network. In 5G, the merger with Sprint in America provided us with a unique opportunity, which we capitalized on to the fullest. Here in Greece, the Cosmote team achieved a remarkable 12.1% return on capital employed in 2023 and has set an ambitious target to deliver more than 15% by 2027.

How is Telekom addressing the challenges of improving its environmental footprint, both its own and that of its partners?

As one of the world’s leading telecommunication providers, we have the responsibility to minimize the environmental impact of our activities. This is why we have set very clear targets. By the end of 2025, we aim to be climate-neutral concerning the emissions we directly or indirectly control. By 2040, we want to reach full net-zero emissions along the entire value chain from the production of network equipment we use for our services, our own operations up to the use of products by our customers. Key drivers for meeting our ambitious targets include the efficient use of energy – for example, by adopting energy-efficient technologies for network operations and data centers – and sourcing 100% of our electricity from renewable sources. We are happy that we have been able to reduce our energy consumption, despite the increase in data usage, in recent years.

Can you explain how Telekom’s brand, as a telecommunications company like yours, has become so valuable globally and is leading in your industry?

In the past years, we have managed to develop a global brand, which is easy to recognize, and easy to relate to emotionally. It’s all about consistency, a clear message of inclusiveness, excellent products, and customer centricity that is not just a buzzword. We have a very consistent appearance in the way we approach customers and I think a brand is always being valued on the delivery. So, you have to deliver better products, you have to deliver better service, you have to deliver what you promised to the world, so that people say: “OK. I trust this brand.”