Deutsche Telekom at a Crossroads: Labour Unrest and Huawei Security Fears Test Investor Confidence

Despite solid Q1 results with revenue up 4.7%, Deutsche Telekom faces escalating strikes by 32,000 workers and political backlash over Huawei use in a drone defense project, keeping shares 14% below peak.

Deutsche Telekom’s first-quarter figures painted a picture of solid momentum — organic revenue up 4.7% to €29.9 billion and adjusted EBITDA AL climbing 7.5% to €11.5 billion. The German telecoms group has also pushed its fibre network past 13 million households, with market penetration rising from 15.5% to 17.1%. Yet two distinct storms are now gathering, threatening to overshadow those operational gains and keep the share price well below its 52-week peak.

32,000 workers on the picket line

The company heads into its fourth round of wage talks with the ver.di union on the 26th and 27th of May with no deal in sight. More than 32,000 employees have already walked out since the first wave of strikes began on 28 April. The union is demanding a 6.6% pay rise for roughly 60,000 tariff-covered staff, and it has dismissed the employer’s initial structural offer as wholly inadequate. Action has spread to twelve federal states, with a 2,500-strong rally in Potsdam.

The industrial action is not just a negotiating tactic — it is already disrupting operations. Delays in technical customer service, appointment cancellations and interruptions to the fibre rollout are piling pressure on management to table a more serious proposal. If the talks fail again, ver.di has hinted at further escalation, which would raise operational risks for the network build-out that underpins the company’s long-term growth story.

Drone defence project draws political fire

Meanwhile, a separate controversy is brewing around a different kind of partnership. Rheinmetall and Deutsche Telekom have joined forces to develop a system to protect cities and critical infrastructure from drones and sabotage. The Telekom’s contribution includes cloud computing, connectivity and data analytics, plus a suite of sensors — video, audio, radiofrequency and remote ID — that can be mounted on existing mobile masts. Rheinmetall brings the counter-drone capabilities.

But the project has caught the attention of politicians from the Union, SPD and Greens, who warn of security risks linked to the continued presence of Huawei technology in the mobile networks that underpin the system. The German government has already signed public-law contracts with Telekom, Vodafone and Telefónica requiring the removal of critical Huawei and ZTE components from 5G core networks by the end of 2026, and from access and transport networks by 2029. That timetable is still running, but has not yet been completed — and the drone project’s reliance on existing infrastructure raises questions about whether the security architecture will be deemed sufficiently sovereign before the Huawei phase-out is finished.

Market shrugs — for now

The stock has so far shown little reaction to either the strike escalation or the Huawei debate. Shares were trading at €29.29 on the day of the drone news, a marginal 0.1% gain, and have added roughly 5% year to date. Yet that leaves them around 14% below the 52-week high of €34.23.

JP Morgan analyst Akhil Dattani argues the recent pullback — almost 7% in the past month — has left the stock looking cheap. He reiterates an "Overweight" rating and a price target of €40, suggesting substantial upside if the twin headwinds ease. However, with the relative strength index hovering near 75, the shares are technically overbought in the near term, leaving them vulnerable to any negative surprise in the wage negotiations or the political scrutiny of the drone project.

The coming days will test whether management can resolve the labour dispute without derailing the fibre expansion, and whether the Huawei timeline is credible enough to protect the company’s push into security-sensitive growth areas. For now, the Telekom’s operational strength provides a buffer — but the margin for error is narrowing.