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DT: Telcos to Weather the Storm

Telecom operators are well placed to get through the current global economic downturn without a significant negative impact on their finances, according to a senior executive from Deutsche Telekom AG (NYSE: DT).

Hamid Akhavan, the CEO of T-Mobile International AG , told the audience at Dresdner Kleinwort 's German Investment Seminar in New York City on Monday that he is cautiously optimistic that carriers, particularly mobile operators, will "weather the storm well," according to a Dresdner research note.

According to the note, Akhavan said Deutsche Telekom had shown resilience against current economic issues, and that indicators such as mobile usage, subscriber growth, uptake of smart mobile devices, and customer bad debt had not displayed any significant signs that customer behavior has been adversely affected.

The T-Mobile man added that the carrier was not planning any operational changes or changes to its guidance as a result of macroeconomic factors. He also reiterated Deutsche Telekom's financial guidance for 2008, though the Dresdner team noted that that did not come as a surprise: "The market fully expects that to be in the bag," they wrote.

The carrier said in November, when it reported its third-quarter earnings, that it expects to report adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of "around €19.3 billion [$25.4 billion]" for the full year 2008. The Dresdner team expects DT to report adjusted EBITDA (that is, EBITDA discounting non-recurring financial events) of €19.43 billion ($25.6 billion) from group revenues of €61.57 billion ($81.1 billion).

Akhavan's message of financial resilience echoes the statement Deutsche Telekom made in November, when it reported that the "worsening financial market crisis has not yet had an impact on the development of operations." (See DT Reports Q3.)

The Dresdner analysts note that with Deutsche Telekom's management "focusing on execution within its current business portfolio," any merger or acquisition activity is "explicitly 'off the radar' at this time." And "given the operational successes of 2007 and 2008 in fixed broadband, cost cutting, and mobile growth," the current situation "bodes well for DT's stock in our view." (See Carrier Scorecard: T-Mobile and DT Ramps IPTV.)

Deutsche Telekom's share price currently stands at €10.38 on the Frankfurt exchange, down €0.15, or 1.4 percent, today. The stock began 2009 at €11.02, while a year ago it stood at €15.19.

— Ray Le Maistre, International News Editor, Light Reading

digits 12/5/2012 | 4:14:16 PM
re: DT: Telcos to Weather the Storm Is this blind optimism in the face of adversity?

Ray
Creagh 12/5/2012 | 4:14:14 PM
re: DT: Telcos to Weather the Storm Ray, Yes on the face of things. If there is no radical shift to dynamic optical switching transport technologies being developed by a couple of emerging vendors that reduce CAPEX/OPEX to the tune of 50 - 80% and correspondingly faciliate the virtualisation of network services to support future PC centric apps...then I think you are right. What I do know is that there are a no. major carriers that are at an advanced stage of change in this regard but there an awful lot of carriers that have'nt moved swiftly enough IMHO. Spells trouble.
digits 12/5/2012 | 4:14:02 PM
re: DT: Telcos to Weather the Storm Creagh
I suggest trying some less obvious sales pitch posts.... this is starting to get as irritating as it is dull...

Ray
JimKnopf 12/5/2012 | 4:13:50 PM
re: DT: Telcos to Weather the Storm Ray,

I don't think that it is blind optimism only (while some optimism might be in there) ... However, looking at the current economic downturn and financial crisis, I conclude the following:
consumers will especially skip lare spendings, that's why the main impact is for instance on the car industry. For the telecommunications sector, especially in terms of long running contracts and flat rate services, the impact will not be seen directly. Furthermore, large incumbents as DT always have the possibility to do investments also directly from their cash flow. Therefore I think that the incumbents might even be strengthend by the crisis as compared to smaller operators that might be more dependent on new loans. Of course the operators are still facing their problems on the OPEX side, but this is to some extend independent of the crisis.
digits 12/5/2012 | 4:13:50 PM
re: DT: Telcos to Weather the Storm Thanks Jim.
I must say I believe those carriers with large mobile subscriber bases are in the best position because I expect them to continue generating significant cash -- they'll need clever back office systems for revenue assurance and marketing to help ease the impact of reduced customer budgets, though.
Stevery 12/5/2012 | 4:13:49 PM
re: DT: Telcos to Weather the Storm For the telecommunications sector, especially in terms of long running contracts and flat rate services, the impact will not be seen directly.

Could not disagree more. Customers are going to get to the point of examining their food bills, let alone their telecom bills. (Businesses too will reexamine what is expendable.)

I have seen predictions of 10M US jobs lost in the coming year. I really hope that number is high; however, if it is correct, there is a world of hurt in the telecom future.
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