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DT Lifts Profit Outlook on US, German Growth

Iain Morris

Good signs in Germany and Europe; T-Systems uninspiring
Outside the US, there was some good news for Deutsche Telekom in Germany, where overall revenues inched up 0.6%, to €5.4 billion ($6.4 billion), and adjusted EBITDA rose 1.1%, to €2.1 billion ($2.5 billion).

Deutsche Telekom claimed to be the only operator in the market to have seen growth in mobile service revenues in the quarter. It also boasted good progress on convergence, with about 3.4 million customers now on deals that include both fixed and mobile services. (See DT's Jan van Damme Flexes Quads.)

In a presentation, Deutsche Telekom said that number equated to 38% of mobile contract subscribers, up from 28% a year earlier, and 17% of household customers, compared with 13% in the second quarter of 2016.

Even so, the operator's share of Germany's retail broadband market is still falling, dropping to 39.6% from 40.5% a year earlier because of competition from cable rivals launching higher-speed services.

Cable market leader Vodafone Germany recently bragged that its 500Mbit/s service was available to about 2.5 million households, or 6% of the country total, across 100 German cities.

Deutsche Telekom has been fighting back through investments in a fiber-to-the-curb network, parts of which now support a technology called vectoring, which boosts connection speeds over last-mile copper loops. (See FTTH Pressure Grows on Deutsche Telekom.)

In the first six months, its capital expenditure in Germany rose 17% year-on-year, to more than €2 billion ($2.4 billion), as it extended its fiber presence. About 63% of broadband customers are now on some kind of fiber-based service, said the operator.

In terms of overall customer development, the German subsidiary lost 103,000 mobile customers in the quarter, leaving it with about 42 million in total, because of a decline in wholesale business. At its own branded contract business, it added 228,000 customers, up from just 89,000 in the January-to-March quarter.

The broadband retail business gained 46,000 customers to finish the quarter with about 13 million subscribers, while the overall number of fixed network access lines shrank by 2.5%, to 19.5 million.

Competition and regulation continue to put pressure on average revenue per user, which fell 7.1% at the German mobile business, to around €13 ($15) per month, compared with the year-earlier period.

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

Revenues across other European businesses rose 2.4%, to around €2.9 billion ($3.4 billion), and by 1.5% on a purely organic basis, thanks to growing interest in converged services. Deutsche Telekom added another 340,000 mobile customers across all of its European operations in the quarter, giving it about 47.7 million in total, and gained 65,000 broadband customers, taking its total to 5.5 million.

Deutsche Telekom blamed regulation and market investments for a 2.2% drop in adjusted EBITDA, to €947 million ($1.1 billion).

The T-Systems International GmbH IT business had another uninspiring quarter, with revenues dipping 1.8%, to €1.7 billion ($2 billion), and order entry down 13.4%, to €1.3 billion ($1.5 billion).

Deutsche Telekom said it had failed to match contracts signed in the year-earlier quarter with comparable deals and that its IT division continued to face pricing pressure.

While adjusted EBITDA soared 22.5%, to €136 million ($161 million), the operator said this reflected the "usually quarterly fluctuations" in the segment and that it was still expecting a stable full-year result.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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