Economy not stopping Deutsche Telekom growth, says CEO

Deutsche Telekom has posted an upbeat set of Q2 results. T-Mobile US continued to deliver strong growth in service revenue and "core earnings," helped along by a growing subscriber base and a strengthening US dollar, while the Group's non-US business – aided by a strong showing in Germany – continues in a growth trajectory.

Although Systems Solutions did not scale the growth heights found in other parts of the Group, top brass at Bonn-based headquarters may well have been reasonably happy that Deutsche Telekom's perennially underperforming enterprise IT services division could at least chip in with what was described as a "stable performance."

Strong Q2 showings in US and Germany give Bonn-based Group cause for greater optimism.
 (Source: Deutsche Telekom)
Strong Q2 showings in US and Germany give Bonn-based Group cause for greater optimism.
(Source: Deutsche Telekom)

The upshot was that Group Q2 earnings before interest, taxes, depreciation and amortization after leases (EBITDAaL) was up 5% year-on-year to €9.9 billion (US$10.2 billion).

The core earnings performance was strong enough for Deutsche Telekom to up full-year Group guidance on this metric for the second time this year, raising it to around €37 billion ($38.2 billion). Previous EBITDAaL guidance was more than €36.6 billion ($37.8 billion).

Group Q2 net revenue increased by 5.9% year-on-year, to €28.2 billion ($29.1 billion), while "high-value service revenues" grew 10.8% to €22.9 billion ($23.6 billion) over the same period.

"We continue to grow, despite the difficult economic environment," said Deutsche Telekom CEO Tim Höttges.

"We are well on track this year to meet our ambitious targets announced at the 2021 capital markets day. Our investments are paying off."

Among the Group targets laid out by Höttges and his management team in May last year was a 3%-4% CAGR on service revenue between 2020 and 2024, and 3%-5% CAGR for adjusted EBITDAaL over the same period.

US powerhouse

T-Mobile US, in which Deutsche Telekom holds a sizable minority (and controlling) stake – and determined it seems to increase its holding above 50% – accounts for the bulk of total Group revenue (66%) and EBITDAaL (64%).

Although total Q2 revenue decreased slightly by 1.1% to $19.8 billion, this was due to a decline in handset leasing revenue, a Sprint business model from which T-Mobile US is gradually withdrawing.

Subscriber-wise, however, T-Mobile US appears to be on a roll. Mobile postpaid net additions were at a record quarterly level of 1.7 million and apparently more than the combined net additions of AT&T and Verizon over the three-month period.

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Q2 revenue in Germany grew 2.7% year-on-year to €6.1 billion ($6.3 billion), while adjusted EBITDAal was up 3.1% to €2.4 billion ($2.2 billion).

Adjusted EBITDAaL for Deutsche Telekom's various other European operating businesses grew 4.5% year-on-year in organic terms.

Full-year turnover outside the US is expected to be about €100 million ($103 million) higher than anticipated previously.

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— Ken Wieland, contributing editor, special to Light Reading

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