Deutsche Telekom is falling as its T-Mobile arm points to Investing.com

Investing.com — Shares of Deutsche Telekom (ETR: ) fell on Thursday after its US unit T-Mobile US (NASDAQ: ) adjusted its financial guidance.

At 6:52 am (1052 GMT), Deutsche Telekom (OTC: ) was trading 2.5% lower at €25.797.

Following T-Mobile’s 2024 Investor Day, the company’s conservative outlook for 2025 sent TMUS shares down, which in turn sent Deutsche Telekom’s share price lower.

T-Mobile’s new guidance indicated projected service revenue growth of about 5% annually from 2023 to 2027, with 6% growth in payments thereafter.

However, growth in 2025 is expected to slow to 4% due to headwinds from wholesale markets and the Affordable Connectivity Program (ACP). Investors have been concerned that these forecasts may not fully reflect the company’s long-term potential.

Free cash flow (FCF) expectations were another point of concern. T-Mobile’s forecast of $18 billion to $19 billion in FCF through 2027 fell 2% below consensus.

The increase in cash taxes as a result of T-Mobile becoming a full taxpayer by 2027 contributed to the weaker FCF outlook. T-Mobile’s strong history of benefiting from tax loss carryforwards and other tax reduction mechanisms over the past 20 years is likely to end.

Morgan Stanley acknowledged that T-Mobile’s long-term strategy, particularly its 35% dividend increase and plans for a $50 billion return on capital over the next three years, provided some positive signals.

However, lower-than-expected guidance for 2025 and $20 billion in unallocated capital created uncertainty around future growth initiatives and shareholder returns.

While the recent guidance revision caused short-term volatility in Deutsche Telekom shares, analysts at Morgan Stanley remain bullish on the company’s long-term outlook.

Focus on growth in rural markets, fiber broadband and 5G expansion continue to position T-Mobile as an industry leader. Deutsche Telekom remains considered “overweight” by Morgan Stanley, with a price target of 31 euros.