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Carrier Scorecard: T-Mobile

Deutsche Telekom AG (NYSE: DT) announced its earnings for 2006 and unveiled a revamped strategy Thursday. (See DT Plans M&A, IPTV Push and DT Reports Q4, Full Year .)

Central to its expansion plan is its wireless business, T-Mobile International AG , which now has more than 100 million customers worldwide. It's also a key contributor to DT's revenues and profits.

So how well is T-Mobile doing? Let's look at the numbers, analyze the division's performance, and hand out a rating, which is something we'll be doing for a number of the world's leading mobile carriers.

Here's a table that shows some of the key indicators for the T-Mobile empire during 2006 compared with a year earlier.

Table 1: T-Mobile International: Facts & Figures
2006 2005 % change Q4 2006 Q4 2005 % change
Revenue (� Millions) 32,040 29,452 8.80% 8,440 7,861 7.40%
Operating Profit/Loss (� Millions) 4,504 3,005 49.90% 976 -726 Not Applicable
Total Subscribers (Millions) 106.42 97.8 8.80% 106.4 97.8 8.80%
Group ARPU (� per month)** 25.09 25.10 0% 26.44 26.79 -1%
** ARPU for year = total revenue divided by customer base divided by 12.
ARPU for quarter is the same calculation but divided by 3 instead of 12.




As we can see, T-Mobile, which had 106.4 million subscribers in Europe and the U.S. at the end of 2006, generated €32 billion ($42.2 billion) in revenues, more than half of DT's total €61.3 billion ($80.8 billion).

Those revenues were up 8.8 percent compared with 2005, while the total customer base grew at exactly the same rate. T-Mobile's operating profit, though, jumped an impressive 49.9 percent to €4.5 billion ($5.94 billion), a big plus point.

Subscriber growth during 2006 was particularly noticeable at T-Mobile US Inc. , where customer numbers grew 15.4 percent to 21.7 million, and in Poland, which recorded a 19.9 percent leap to 12.23 million, as the table below shows.

Table 2: T-Mobile Subscriber Base by Market
End of 2006 End of 2005 Change (thousands) % change
Total global subscribers 106,419 97,846 8,573 8.8
Subscribers in Europe 81,378 76,156 5,222 6.9
Subscribers in U.S. (T-Mobile USA) 25,041 21,690 3,351 15.4
Germany 31,398 29,523 1,875 6.4
U.K.* 16,905 17,158 -253 -1.5
Poland 12,228 10,201 2,027 19.9
Austria 3,180 3,119 61 2
Netherlands 2,552 2,317 235 10.1
Czech Republic 5,049 4,634 415 9
Hungary 4,431 4,194 237 5.7
Croatia 2,158 1,903 255 13.4
Slovakia 2,201 2,022 179 8.9
Other** 1,277 1,085 192 17.7
* Note from DT: Including Virgin Mobile. The decline on 2005 is based on a change in the definition of Virgin customers since the first quarter of 2006. Since then, Virgin customers have been reported on a 180-day migration basis (previously 360 days). The 2005 customer figures have not been adjusted.
** "Other countries" includes T-Mobile Macedonia (formerly MobiMak) and T-Mobile Montenegro (formerly MONET).
Source: Deutsche Telekom/T-Mobile




While none of T-Mobile's other significant markets could match that impressive growth, three others recorded growth in the high single or low double digits -- the Netherlands, Czech Republic, and Slovakia. The bundled "other" markets of Macedonia and Montenegro, both in Southeastern Europe, grew 17.7 percent to a joint total of nearly 1.3 million, but from a low starting point of little more than a million.

But these markets, and others in Central and Eastern Europe, where T-Mobile is a recognized brand, are set to grow in the coming years as GDP increases and mobiles become the de facto mode of voice communication -- so the carrier is well placed to benefit.

The worst performing market was Austria, where the customer base grew just 2 percent to nearly 3.2 million. In the U.K. the numbers were skewed by a change in the way connections from Virgin Mobile Telecoms Ltd. , the MVNO (mobile virtual network operator) that uses T-Mobile (UK) 's network, were calculated, and the numbers dipped year-on-year.

ARPU (average revenue per user) numbers showed why mobile operators need to persuade their subscribers to buy more data services. Over the whole of 2006 the metric was practically flat at €25, while in the fourth quarter there was a slight year-on-year decline of 1 percent to €26.44.

The analyst team at Lehman Brothers noted the relative financial strength of DT's mobile operation compared with its fixed-line business, while at Dresdner Kleinwort , analysts remarked on the carrier's determination to improve the quality of service it provides to mobile customers in Germany. However, the root cause of this strategy and planned investment is the self-confessed high level of complaints made by subscribers about how shoddy the service can be.

With Deutsche Telekom's youthful new CEO planning mobile acquisitions (under the right conditions), and the T-Mobile group experiencing subscriber, revenue, and operating profit growth, the performance in 2006 is encouraging, as is the outlook for 2007.

With our grading system ranging from A (highest grade) to F (lowest, a real stinker), we're pinning a B+ on T-Mobile International.

— Ray Le Maistre, International News Editor, Light Reading

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