Deutsche Telekom upgraded to A3 by Moody's on strong performance

Moody's Ratings has upgraded Deutsche Telekom AG's senior unsecured ratings to A3 from Baa1, with a stable outlook, citing the company's sustained strong operating performance in both the U.S. and Germany. This upgrade reflects expectations of continued robust performance through 2027, supporting solid free cash flow generation and credit metrics, including a projected net debt to EBITDA ratio below 3.0x. The company reported strong H1 2025 results with revenue up 3.7% and net profit surging 34.1%, underpinning its substantial market position and diversified portfolio, further bolstered by a one-notch uplift due to implicit government support from its 28.3% state ownership.

Analysis

Moody's upgrade of Deutsche Telekom's senior unsecured rating to A3 from Baa1, with a stable outlook, is a direct result of sustained, strong operating performance in its key US and German markets. This is quantitatively supported by robust first-half 2025 results, which saw revenue grow 3.7% to €58.4 billion and a notable 34.1% surge in net profit to €5.5 billion. The ratings agency projects this momentum will continue, with revenue and EBITDA forecast to grow over 2.5% annually through 2027, underpinning a solid financial profile. The company's credit metrics are expected to remain strong, with Moody's projecting the adjusted net debt to EBITDA ratio will stay slightly below 3.0x, complemented by a retained cash flow to net debt ratio near 24%. This financial discipline, combined with a significant 28.3% ownership stake by the German government that provides a one-notch rating uplift, solidifies Deutsche Telekom's improved creditworthiness and financial stability.

Key Decisions for Investors

• For credit investors, the upgrade to 'A3' with a stable outlook solidifies Deutsche Telekom's status as a high-quality issuer, potentially leading to spread compression on its outstanding debt.
• Equity investors should view the combination of strong net profit growth, positive forward guidance from Moody's, and a lower cost of capital resulting from the credit upgrade as a reinforcement of the fundamental bull case for the stock.
• It is critical to monitor the company's adherence to its financial policy, specifically maintaining the net debt-to-EBITDA ratio below the 3.0x level, as any deviation could jeopardize the stable outlook and revised rating.