Telefonica Deutschland sees 600 mln euro profit boost from digital drive

FRANKFURT, Feb 23 (Reuters) - Telefonica Deutschland said on Friday it was launching a digital transformation drive that will deliver a 600 million euro ($738 million) boost to its core earnings between 2019 and 2022.

Germany’s No.3 mobile operator, controlled by Telefonica of Spain, will launch its first digital product offerings in the first half of 2018, it said before holding an investor day in London.

CEO Markus Haase said Telefonica Deutschland had now completed the integration process following its 2014 merger with E-Plus. “Now, we are concentrating completely on the customer experiences and digital transformation,” he said in a statement.

Investments for the “Digital4Growth” programme will initially be financed through as-yet unrealised synergies from the integration with E-Plus.

In the medium term, Telefonica Deutschland wants to increase revenues in line with the broader market, while seeking to add 200-300 million euros on the top line from its “Internet of Things” business.

The company expects the digital transformation to boost margins and free cash flow. CFO Markus Rolle said that Telefonica Deutschland planned to distribute a large share of its free cash flow in dividends.

The announcement comes after investors reacted to Telefonica Deutschland’s annual results this week by selling its stock. Some analysts said it was not investing enough to ready the rollout of next-generation mobile services. ($1 = 0.8127 euros) (Reporting by Douglas Busvine; Editing by Tom Sims)