Deutsche Telekom Navigates Labour Dispute and Defence Pivot as T-Mobile US Drives Q1 Beat

The German telecoms incumbent has delivered a strong set of first-quarter numbers, but the broader narrative around the stock is no longer just about fibre rollouts and US mobile subscribers. Deutsche Telekom is simultaneously fighting a heated wage battle at home and forging an unlikely alliance with a defence giant, while its American subsidiary continues to provide the bulk of the earnings firepower.

US growth overshadows domestic fibre challenges

T-Mobile US once again stole the show. Service revenue at the American arm surged 11.5% to $18.9bn, with adjusted EBITDA AL climbing to $9.1bn. The unit added 217,000 postpaid net customers, cementing its role as the group’s primary growth engine. The problem for investors is that this concentration creates a valuation dependency — a point the DZ Bank analysts highlighted when they trimmed their fair value for the stock from €39 to €37, citing a lower target multiple for T-Mobile US. The buy recommendation was kept, but the warning was clear: Deutsche Telekom’s equity story is largely written in dollars.

At group level, revenue reached €29.9bn in the first quarter, representing organic expansion of 4.7%. Adjusted EBITDA AL hit €11.5bn, underscoring the operating leverage in the model. Chief executive Tim Höttges struck a confident note, arguing the business has been largely insulated from global uncertainties. Back in Germany, however, the picture is more mixed. The fibre network now passes 13 million households, with 2.2 million active FTTH customers — a take-up rate of just 17.1%. In the fixed-line broadband market, the company actually lost some subscribers, a reminder that infrastructure investment alone does not guarantee revenue conversion.

Higher guidance but a lower target price

Management raised the bar for 2026, now targeting adjusted EBITDA AL of approximately €47.5bn, free cash flow AL above €19.8bn, and adjusted earnings per share of €2.20. Despite the improved outlook, the DZ Bank cut its price target, reflecting a more conservative stance on T-Mobile US’s valuation. The broader analyst consensus remains moderately bullish, with an average price objective of €38.84. Yet the stock itself has struggled: Wednesday’s close was €28.15, leaving the shares down 11.34% over twelve months and up a mere 1% year-to-date. Technically, the equity trades below both the 50-day moving average of €30.37 and the 200-day line of €29.27, though the relative strength index of 64.2 suggests no extreme oversold conditions.

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Labour strife escalates as talks stall

While the quarterly numbers were solid, the atmosphere around the domestic business has soured. The third round of wage negotiations, held on 11-12 May in Potsdam, produced no deal. Deutsche Telekom tabled its first structural offer, but ver.di rejected it outright. Union negotiator Frank Sauerland said the proposal was nowhere near enough to protect real wages. Since the start of industrial action on 28 April, more than 20,000 employees have taken part in warning strikes. Around 2,500 gathered at the Potsdam rally, and for the first time workers from subsidiaries T-Systems and Telekom Services Europe also walked out.

Ver.di is demanding a 6.6% salary increase over twelve months, an annual member bonus of €660, and an extra €120 per month in training allowances. The next — and for now final — round of talks is scheduled for 26-27 May. The outcome will determine whether the dispute escalates further or a compromise can be found.

Defence deal opens a new front

Amid the domestic turbulence, Deutsche Telekom announced a strategic move that raised eyebrows across both the telecoms and defence sectors. The company is partnering with Rheinmetall to protect cities and critical infrastructure from drone attacks and sabotage. The collaboration, unveiled ahead of the AFCEA security fair in Bonn, divides responsibilities clearly: Rheinmetall supplies sensor technology and countermeasure effectors, while Deutsche Telekom contributes its mobile networks and digital know-how. The goal is a multi-layered shield integrating cybersecurity, sensing, and secure communications.

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A particular focus is drones controlled via mobile networks — a threat that is growing as commercially available and home-built devices become more sophisticated. The Telekom is also researching detection methods together with the Helmut Schmidt University in Hamburg. The partnership marks a notable pivot for a company better known for consumer broadband and US mobile growth than for defence applications.

Stock edges up but remains under the cloud of wage talks

The Q1 release gave the shares a short-term lift, pushing them to €28.01, a daily gain of around 1.4%. The relative strength index hit 77.5, indicating overbought territory on a short-term basis, and the gap to the 50-day moving average remains wide. The labour dispute is an overhang that will not disappear until the late-May negotiating round produces either a settlement or an escalation. The company’s raised guidance and robust US performance provide a solid operational backdrop, but the stock’s trajectory will depend on two factors: whether T-Mobile US can maintain its growth trajectory without hitting valuation headwinds, and whether the domestic wage battle can be resolved without significant operational disruption.

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