Deutsche Telekom's Union Ballot Looms Over AI Pivot and Share Buyback Momentum

Deutsche Telekom's Verdi vote on a labour deal covering 60,000 workers could remove key uncertainty, allowing focus on AI automation, strong Q1 results, and €2bn buyback. Stock down 5%.

Deutsche Telekom faces a pivotal moment on Friday as Verdi's tariff commission votes on a new labour agreement that would lock in wage costs for nearly three years — a decision that could remove one of the few clouds hanging over a stock that has struggled to hold its gains. The Bonn-based operator has plenty of good news to point to: an expanding AI automation push, rising earnings, and a steady stream of share repurchases. Yet the market has been unmoved, with the stock falling around 5% in the past week to trade at €27.02.

The labour deal, struck in late May, would cover roughly 60,000 workers and run for 33 months through to the end of 2028. The package includes a phased increase in additional monthly pay over the next two years, followed by a 2.4% rise in base salaries in June 2028 — equating to a cumulative increase of around 8.5% for an average employee. Crucially, the agreement rules out compulsory redundancies for its entire duration and offers exclusive bonuses for union members. The tariff commission has recommended acceptance, making a positive outcome on 19 June all but certain.

Should the vote pass, it would hand management the planning certainty it craves. Analysts would be able to plug precise personnel cost assumptions into their earnings models, removing a recurring source of uncertainty. That would clear the decks for investors to focus on the group's operational momentum — which has been quietly building.

First-quarter numbers published on 13 May underlined the trend: revenue rose 4.7% organically, while adjusted operating profit climbed 7.5% to €11.5bn. Earnings per share of €0.54 beat expectations by 15.7%, and revenue of €29.87bn came in 10.5% above consensus. Management responded by lifting its full-year guidance, now targeting adjusted EBITDA after leasing of €47.5bn and free cash flow of more than €19.8bn. The US arm, T-Mobile, continued to drive organic service revenue growth of 4.6%.

Beyond the numbers, the group is pursuing two distinct growth levers. One is a deepened partnership with n8n, a fast-rising European AI orchestration specialist. Under the tie-up, Deutsche Telekom will offer small and medium-sized enterprises ready-made AI automation packages — covering licences, implementation and training — for tasks such as accounting, project management and marketing. The approach leans on the company's existing business-customer relationships and targets firms without their own development staff. The solutions are designed to be audit-proof, a nod to German regulatory sensibilities.

The other lever is capital allocation. Between the start of April and early June, the company bought back roughly 13.7 million of its own shares as part of a programme that can reach €2bn this year. The buyback has provided a floor of sorts, though the stock remains roughly 19% below its 52-week high of around €34.80. Ahead of the Verdi vote, the shares were changing hands at €27.69, but they have since given up ground amid broader sector weakness.

Analysts remain broadly bullish. J.P. Morgan, Deutsche Bank and DZ BANK all rate the stock a buy, and the consensus 12-month target of €38.89 implies upside of roughly 35%. Yet the gap between the current price and that target highlights the market's lingering caution. With the labour deal likely settled by Friday, the onus will shift to the group's ability to convert its AI distribution strategy, fibre roll-out — now reaching over 13 million German households — and strong US operations into sustained earnings growth. The next scheduled catalyst arrives on 6 August with second-quarter results.