& cplSiteName &

DT Lifts Profit Outlook on US, German Growth

Iain Morris
8/3/2017
50%
50%

Deutsche Telekom has raised its earnings guidance for the year after its second-quarter results beat expectations thanks to the continued strong performance of its T-Mobile US business and growth in Germany.

The German operator is now expecting full-year earnings (before interest, tax, depreciation and amortization) of €22.3 billion ($26.4 billion), up from a previous forecast of €22.2 billion ($26.3 billion). It is still guiding for a revenue increase this year.

Customer growth at T-Mobile US Inc. fueled a 6% increase in Group revenues, to about €18.9 billion ($22.4 billion), compared with the year-earlier period, while adjusted EBITDA rose 8.9%, to €5.9 billion ($7 billion). Deutsche Telekom's net profit was up 40.7%, to €874 million ($1 billion).

Analysts polled by Reuters had been expecting adjusted EBITDA of between €5.63 billion ($6.67 billion) and €5.89 billion ($6.98 billion).

At the time of publication, Deutsche Telekom AG (NYSE: DT)'s share price was trading up 0.87% in Frankfurt, at €15.73 ($18.63).

Amid speculation about a possible merger between T-Mobile US and rival Sprint Corp. (NYSE: S), Deutsche Telekom hailed its subsidiary as the "undisputed growth superstar" in the US mobile market. (See Sprint's CEO Expects M&A-Related Announcement 'Soon'.)

Under the leadership of maverick CEO John Legere, T-Mobile US picked up another 1.3 million customers in the April-to-June quarter, meaning it has now signed up more than 1 million customers in each of the last 17 quarters. Service revenues at the business were up 8.5%, to $7.3 billion, while adjusted EBITDA grew 18%, to around $2.9 billion. (See T-Mobile Adds 1.3M Subs, Stays Quiet on 'Rumorville'.)

T-Mobile US is proving costly in other ways, though, spending nearly $8 billion on 600MHz licenses during a recent government auction. For Deutsche Telekom, that meant forking out €7.2 billion ($8.5 billion) in spectrum payments in the quarter, up from just €39 million ($46 million) a year earlier.

Even excluding those payments, capital expenditure across the business rose 12.4%, to nearly €3 billion ($3.6 billion), largely because of broadband investments in Germany.

The spectrum bill triggered a 13.5% increase in Deutsche Telekom's net debt, to €55.2 billion ($65.4 billion). With net debt at 2.5 times annual EBITDA, the operator is now at the upper end of its "comfort zone" ratio.

Having previously seen T-Mobile US as a distraction from its Europe-focused strategy, Deutsche Telekom failed to engineer a sale of the business to Sprint in 2014 when US authorities blocked its plans out of concern that consolidation would harm competition.

More recently, however, Deutsche Telekom has looked on T-Mobile US as a potential "kingmaker," hinting that it could become the controlling shareholder of a combined T-Mobile US and Sprint. Supporters of a tie-up believe it would create a stronger rival to market leaders AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), and that President Donald Trump's new administration is prepared to wave through a deal. But Deutsche Telekom appears to face competition from US cable operators that also see the attractions of a merger with Sprint. (See Charter Rebuffs Sprint, Still a SoftBank Target?.)

Next page: Good signs in Germany and Europe; T-Systems uninspiring

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Featured Video
Upcoming Live Events
September 17-19, 2019, Dallas, Texas
October 1-2, 2019, New Orleans, Louisiana
October 10, 2019, New York, New York
October 22, 2019, Los Angeles, CA
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events