DT Is Back in Schwarz

Europe's largest carrier posts higher than expected Q1 profits, plans to expand its wireless business

May 15, 2003

2 Min Read
DT Is Back in Schwarz

Deutsche Telekom AG (NYSE: DT) posted its first quarterly net profit Thursday after six straight quarters of losses, thanks in part to its mobile business (see DT's Back in Black for Q1).

Europe's largest carrier surprised analysts with a net profit of €850 million (US$977.3 million) in the first quarter of 2003. Analysts had been expecting a loss of €487 million ($558.2 million). Deutsche Telekom posted a loss of €1.8 billion in the year-ago period.

The news was enough to boost DT's ADR shares nearly 5 percent in early trading today on the NYSE. Shares were up $0.61 to $14.11.

The carrier’s profit was boosted by higher than expected operating earnings at its wireless and fixed-line divisions and gains from asset sales, including the sale of the company’s cable TV unit. Excluding special items, DT posted a profit of €100 million ($114.6 million), compared with a loss of €1.4 billion in the same period of 2002.

Deutsche Telekom aims to boost profitability by shedding 55,000 jobs through 2005, mostly in its fixed-line unit, T-Com, and by expanding its mobile business, T-Mobile.

T-Mobile International AG's EBITDA (earnings before interest, taxes, depreciation, and amortization) rose 25 percent to €1.5 billion in the period, beating analysts' expectations of €1.47 billion. Customer numbers also rose across the mobile group, with 927,000 new customers signing up for T-Mobile USA in the quarter.

The results out of T-Mobile (UK) weren't quite as bright. According to Merrill Lynch & Co. Inc. analyst Christiane Katzer, the U.K. division lost 234,000 subscribers over the year. "This was largely expected and due to cleaning up, but they are losing customers to Virgin Mobile Telecoms Ltd.," she says. "Cleaning up" refers to wiping inactive customers and bad debtors off the books.

”We have started the turnaround,” said Deutsche Telekom CEO Kai-Uwe Ricke, in a prepared statement. “We are regaining financial and strategic flexibility.”

Due to the improved results, DT is refining its EBITDA forecast, predicting a range of €17.2 billion to €17.7 billion, as opposed to its previous forecast of €16.7 billion to €17.7 billion. Ricke added, “At the end of this year, I hope to be able to say that Deutsche Telekom has put its period of losses behind it.”

— Jo Maitland, Senior Editor, Boardwatch

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