Deutsche Telekom's Dividend and Upgrade Provide Little Shelter as Merger Jitters and Buyback Expiry Bear Down

The split between Deutsche Telekom’s solid operational performance and its sinking share price has rarely been wider. The stock closed Thursday at €26.10, barely two percent above its 52-week low, even as Fitch lifted the Bonn-based group’s credit rating to A- from BBB+ with a stable outlook. Analysts point to a perfect storm of technical and sentiment headwinds: the tail end of a share buyback programme, a puzzling early-stage merger proposal for T-Mobile US, and an oversold reading on the relative strength index.

The most immediate pressure comes from a report by the Wall Street Journal, which revealed that preliminary talks are under way for a new multinational holding company that would fold Deutsche Telekom into its U.S. subsidiary T-Mobile US via a pure share exchange. The structure echoes the dual-listing model used by Linde and Praxair. Investors have reacted with alarm, fearing regulatory complications and potential dilution. With the German federal government and KfW collectively holding roughly 28% of Telekom’s stock, Berlin’s approval would be a mandatory hurdle, adding an unpredictable political dimension to any deal.

At the same time, a key source of market support is vanishing. Friday marks the conclusion of the second tranche of Deutsche Telekom’s current buyback programme. Since April the company has spent up to €550 million to repurchase nearly 17 million shares, including 1.65 million in the past week alone. With that buying pressure gone from July onward, the stock loses a reliable anchor. Management has pencilled in up to €2 billion in total buybacks for 2026, but the timing of a third tranche remains undisclosed. Most of the repurchased shares are cancelled, which typically bolsters earnings per share, but the near-term absence of buyback demand weighs on sentiment.

Should investors sell immediately? Or is it worth buying Deutsche Telekom?

All of this stands in stark contrast to the group’s financial trajectory. In the first quarter, adjusted operating profit rose 7.5% to €11.5 billion, prompting management to lift its full-year guidance. Fitch highlighted the strength of the U.S. business, where T-Mobile US continues to deliver consistently, and praised the group’s overall financial flexibility. The company is targeting a cumulative free cash flow surplus of roughly €15 billion by 2027, which it plans to use for debt reduction while cementing its stake in America. Domestically, the infrastructure push rolls on, with 4G and 5G networks expanding to meet annual data demand growth of around 30%. A technical milestone arrives at the end of June, when Telekom switches off the legacy MMS service in favour of the modern RCS standard.

On the employee front, a new collective wage agreement struck with the ver.di union in late May provides labour peace through the end of 2028. The deal includes total pay increases of 8.5% and rules out compulsory redundancies. That gives management some stability on the home front as it navigates the merger rumours.

Investors are now watching the charts for a signal. The 14-day relative strength index has fallen to 31.3, flirting with oversold territory. Over the past month, the shares have lost just over 11% of their value. Analysts see a possible floor forming but caution that the current uncertainty requires a clear catalyst. The next hard data point arrives on August 6, when Deutsche Telekom reports second-quarter earnings. The market will be looking not only for numbers that confirm the group’s profitability — a key factor behind the Fitch upgrade — but also for any clarification on the rumoured holding structure. Without that, the stock may struggle to reclaim the long-term moving average of €28.90.

In the meantime, the dividend outlook offers a modicum of support. Consensus forecasts for the next payout range between €1.12 and €1.25 per share, and annual revenue is expected to land at roughly €122.3 billion. Yet for now, with buyback support gone and a potentially game-changing corporate structure hanging in the air, the market is giving the benefit of the doubt to the bears.

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