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Deutsche Telekom buoyed by T-Mobile US; shifts investment focus to Germany


Timotheus HöttgesVorstandsmitglied Finanzen, Deutsche Telekom AGBoard member for Finance (CFO), Deutsche Telekom AGNur zur redaktionellen Verwendung im direkten Zusammenhang mit der Deutschen Telekom AG. Editorial use only in direct correlation with Deutsche Telekom AG.
Ken Wieland

by

There seems little rush for Deutsche Telekom (DT) to offload its T-Mobile US subsidiary if Q2 results are anything to go by. The German incumbent is nonetheless shifting investment focus onto its domestic market.

DT boosted Q2 capital expenditure in Germany by 58 per cent, to over €1 billion, splashing out on both mobile and fixed networks. It represents about a half of total group capex for the period, which increased 6.2 per cent to €2.2 billion.

“Our strategy so far has been to make bold and prudent investments, focus first on lifting customer numbers, and then on upping revenues and results. And we are now starting to reap the rewards,” said Tim Höttges (pictured), Chairman of the Board

Group Q2 turnover was stable, down a slender 0.3 per cent – to €15.11 billion – but it masks a wide variation between the US and Europe.

T-Mobile US sales increased 14.6 per cent, to $7.2 billion (€5.3 billion), buoyed by customer acquisition.

Given the string of discount offers that T-Mobile US has made in recent months, it’s perhaps not surprising that the operator should continue to rake in more subscribers and boost revenue. The operator added 1.47 million new customers during the quarter, 908,000 of them branded postpaid customers

What’s more impressive, however, is that margins are improving too. Adjusted EBITDA generated by T-Mobile US during the quarter rose 22.1 per cent, to $1.5 billion (€1.1 billion).

In sharp contrast, sales from operations in Europe (excluding Germany) – weighed down in part by regulation in the mobile sector – fell 7.9 per cent to €3.16 billion.

Cost efficiencies helped cushion the top-line impact. When seen through the lens of adjusted EBIDTA on organic terms (which strips out the effect of acquisitions and currency swings), earnings in Europe were up 1.7 per cent. Reported adjusted EBITDA, however, fell 1.7 per cent to €1.01 billion.

Second quarter sales in Germany dropped 1.8 per cent, to €5.46 billion. Mobile revenue fell 2.3 per cent, to €1.88 billion. More encouragingly, DT managed to grow its mobile contract base in its home market by 275,000 during the quarter.

Group net profit increased 34.2 per cent, to €711 million, helped by earnings from the spectrum swap with Verizon in the US.

Adjusted net profit, by contrast, declined 21.5 per cent to €636 million. DT said this was primarily due to increased depreciation and amortisation following the MetroPCS takeover.

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