Deutsche Telekom Reports Q1

BERLIN -- Deutsche Telekom continued to grow internationally as a result of the first-time consolidation of the Greek OTE group. Following the first-time inclusion of OTE, its subsidiaries and majority shareholdings in Southeastern Europe, the number of fixed-network customers at the end of the first quarter of 2009 increased by 7.5 million in total, of which broadband customers accounted for around 1.7 million. The Broadband/Fixed Network business area recorded around 40 million fixed-network and almost 17 million broadband lines at the end of March. The number of mobile customers grew by around 20 million following the inclusion of the OTE subsidiaries, bringing the total customer base, including net additions in the existing mobile companies, to just under 150 million at the end of March.

Deutsche Telekom expects OTE to boost the Group's adjusted EBITDA by around EUR 2.0 billion in total over the eleven months of the 2009 financial year since its consolidation. As a result, the Group's guidance needs to be increased by a similar amount, having originally been reduced on April 21 by 2 to 4 percent compared with the prior-year figure of EUR 19.5 billion. Deutsche Telekom expects OTE to contribute around EUR 0.6 billion to free cash flow, bringing the Group total to around EUR 7 billion.

In the first three months of 2009, Deutsche Telekom generated revenue of EUR 15.9 billion, 6.2 percent more than in the first quarter of 2008. Deutsche Telekom has thus strengthened its position as the European company with the best top-line performance in the industry. Adjusted EBITDA increased by 2.7 percent to EUR 4.8 billion. Without the inclusion of OTE, revenue in the first quarter was stable at EUR 15.0 billion and adjusted EBITDA declined 4.8 percent to EUR 4.5 billion. Fixed-network business in Germany and abroad, mobile business in Germany and across most of Europe, and T‑Systems, have thus all developed in line with or slightly above expectations. In contrast, the mobile communications companies in the United States, the United Kingdom, and Poland all reported decreases, attributable in part to the economic downturn, a more intense competitive environment and, concerning the European companies, to significant changes in exchange rates. Year-on-year the Polish zloty lost around 26 percent on the euro and the pound sterling around 20 percent. "The figures we are presenting today show a mixed picture: Despite the difficult environment in some markets, we are in a relatively stable position," explained Chairman of the Board of Management, René Obermann.

The Group reported adjusted profit in the first quarter of EUR 0.7 billion, a 12.7-percent decline on last year's figure of EUR 0.8 billion, reflecting a slight downward trend in operational terms. Despite the acquisition of OTE, the loss from financial activities remains stable at EUR minus 0.7 billion. Overall, OTE has already made a positive contribution to the Group’s net profit and free cash flow.

The unadjusted net loss was EUR 1.1 billion, compared with a net profit of EUR 0.9 billion in the previous year. The difference is mainly due to the impairment of goodwill at T‑Mobile UK amounting to EUR 1.8 billion. This impairment, which has no effect on cash flows, echoes the strong economic slowdown and more intense competition in the United Kingdom and was announced in the press release dated April 21. The free cash flow of EUR 0.3 billion can hardly be compared with the prior-year figure of EUR 1.6 billion, due to the considerably higher capital expenditure and cash outflows for staff-related measures in the first quarter of 2009.

The Save for Service program also contributed to safeguarding earnings in the first three months of 2009. By the end of the first quarter of 2009, gross savings since the program was launched in 2006 totaled EUR 4.4 billion, up from EUR 4.1 billion at the end of 2008.

Deutsche Telekom AG (NYSE: DT)