Signup for our free newsletter:

Deutsche Telekom Stock

Written By Brian Hicks

Posted May 18, 2009

They came in droves to T-Mobile’s party. Admission was free, and so was the booze.

Few cared about the fact they’d just become a walking T-Mobile ad… Bright wristbands emblazoned each partygoer with the company’s logo and new product name.

I heard the news from a friend who read about it on Facebook. Another buddy found out that a top DJ was set to spin music all night.

But the key for Deutsche Telekom (NYSE:DT), T-Mobile’s German parent, is that the bash will always be remembered as "that T-Mobile party."

With DT’s share price way down, its dividend nearing double-digits, and a social marketing strategy in place to keep the revenue pipeline flowing, we could be looking at a great global telecom play.

Walking Billboards

Word of mouth is no longer word of mouth, after all. Text messages, Facebook posts, tweets, and chirps can turn every potential reveler into a peer-to-peer electronic marketing unit.

Right now, with ad budgets tighter than ever and customer retention being everyone’s top task, social marketing makes sense.

The cost of acquiring new customers can vary wildly from company to company and campaign to campaign. . .

Yet, it must be true today that rather than cast the advertising dragnet of a billboard — where you grab plenty of eyes but maybe only a few you really want — social marketing allows for better focus and more momentum as the marketing message goes viral.

Otherwise, T-Mobile wouldn’t be buying Jack Daniel’s & Coke for a warehouse full of 20-somethings.

Winning with Global Telecom Strategies

The 18-24 demographic is more powerful today than ever before. Winning a new customer means new revenue through service upgrades, overage charges, and a constant urge to have the freshest voice and data devices.

But Mobile Number Portability (MNP) is the sword dangling over every telecom exec’s head, threatening to take all that juicy income elsewhere.

As I’m the traveling type, the communications advances of the past half-decade have made my life amazingly easy to manage, no matter where I am.

Most importantly, perhaps, MNP allows me to take my 10-digit phone number to any company that can successfully woo me.

Spending to drag customers like me away from a competitor with MNP requires more effort through upfront spending and direct pricing competition. That can mean a $200 credit on a $250 phone, or unrelated goodies like drinks and dancing.

T-Mobile recognizes the continuing revenue opportunities that social marketing can create (their dance invasion of a London Underground station this spring was also a YouTube sensation).

This year will probably still be tough for Deutsche Telekom shares and telecoms in general, and the company just warned on full-year earnings in late April.

Nevertheless, as a lasting proposition for earnings growth, I like what the company is doing.

NYSE:DT currently trades at just over $11 per share, down from nearly $18 one year ago.

Of course, I wouldn’t expect you to wait around for the company to throw you a party just so you pick up some shares.

It’s their hefty dividend over 9% (DT just paid $1.04 on under $11 per share April 28) that should keep you hanging with it.


Sam Hopkins

P.S. When I go abroad, I don’t just use telecoms to connect me to my family, work, and friends. . . I also make observations and compare market conditions everywhere I set foot. In Japan, for example, I met with executives at phone giant NTT DoCoMo to get the scoop on their new marketing approach. I recommended the stock based on my research, and it was up nearly 20% within weeks. Now, I’m working with Options Trading Pit editor Ian Cooper to pinpoint winning — and losing — telecom strategies. To learn more about OTP and our international angle, click here: