Wednesday, August 6, 2008

Deutsche Telekom's 1H08 Revenues Decline 3% to EUR 30.1 billion

Deutsche Telekom's reported revenue for the first half of 2008 declined by three percent to EUR 30.1 billion. On an organic basis, i.e. adjusted for exchange rate effects and changes in the composition of the Group, revenue would have increased slightly by 0.3 percent to EUR 30.8 billion. At EUR 9.5 billion, the Group's adjusted EBITDA was down 0.5 percent on the previous year. On an organic basis, EBITDA would have increased by 0.5 percent to EUR 9.7 billion.

Four factors in particular contributed to these positive results.

Deutsche Telekom said that T-Home's domestic fixed-network business improved slightly year-on-year, mainly on the back of cost savings from the "Save for Service" program and a substantial slowing of the revenue decline in the second quarter. T-Mobile Deutschland increased adjusted EBITDA in the first six months of the current year, lifting the margin from 36.4 percent in the first half of 2007 to 38.2 percent. In addition, T-Mobile USA further increased its earnings performance, with a higher EBITDA margin of 28.7 percent in the first half of 2008 compared with 28.0 percent in the prior-year period. And the mobile communications companies in Poland, the Czech Republic and Slovakia posted double-digit growth rates for both revenue and adjusted EBITDA.

"We made good progress during the first half of the year in achieving our strategic objectives, both in operations and with our cost savings. This leads us to assume that we will reach our financial targets in the 2008 financial year," stated Deutsche Telekom's CEO, René Obermann.

Some highlights:

Mobile Communications

  • T-Mobile Deutschland increased its profitability in a fiercely contested market, lifting its adjusted EBITDA margin to 39.6 percent in the second quarter of 2008 from 36.9 percent in the previous year.

  • T-Mobile Deutschland is the exclusive seller of Apple iPhone in Germany. T-Mobile has also been selling the iPhone 3G in Austria and the Netherlands since June 11.

  • T-Mobile USA had 31.5 million customers as of June 30, 2008, 4.6 million more than a year earlier. Between April and June, this company recorded 668,000 net additions. The decrease compared with the prior-year figure of 857,000 can be mainly attributed to higher churn among contract customers following the expiration of the first two-year fixed-term contracts that were introduced for new customers in April 2006 for the first time. At 3.2 million in the second quarter of 2008, gross additions were again above the high level achieved in the previous year. In the second quarter, T-Mobile USA added more than one million MyFaves customers, pushing the number of customers who use this community rate to over 6.5 million.

  • T-Mobile UK recorded a decrease in revenue of 11.5 percent in the first six months to EUR 2.07 billion compared with the same period in 2007. Measured in pounds sterling, however, revenue rose by 1.7 percent. In addition to exchange rate effects, this development reflects the fierce competition in the UK market.

Broadband/Fixed Network

  • In its domestic market, T-Home recorded stable earnings and a decrease in revenue in line with expectations. The year-on-year revenue decline of 4.4 percent to EUR 4.73 billion in the second quarter of 2008 was at the lower end of the forecast of minus four to minus six percent. In the first quarter of this year, revenue had decreased by 6.1 percent.

  • On the German broadband market, T-Home has a market share of over 40 percent of new DSL customers for the seventh consecutive quarter. This corresponds to 340,000 net additions in the second quarter. The number of T-Home DSL retail customers has thus grown from 8.0 million to 9.9 million in one year. Around a quarter of a million customers have now opted for an Entertain package with fast Internet access and IPTV.

  • In addition to line losses resulting from competition and regulatory changes designed to reduce the market share, since the beginning of the year losses have also included reductions that are primarily a result of the migration of DSL resale customers to All IP. Line losses in the first half of 2008 were also largely attributable to this second factor. Consequently, the total number of line losses cannot be directly compared with those in the previous year.

  • As announced in March, Deutsche Telekom expects the number of lines in Germany to decline by between 2.5 and 3.0 million in the full 2008 financial year. At 1.2 million in the first half of the year, the decrease in the number of lines is at the lower end of the range expected for 2008 as a whole. In the second quarter, the total number of line losses was around 650,000. This quarter-on-quarter increase was primarily attributable to the stronger impact of resale customers migrating to All IP. The number of resale lines decreased by around 230,000 in the second quarter.

Business Customers

  • T-Systems' international business grew by 3.2 percent in the first six months of 2008 to EUR 1.2 billion. This development is primarily attributable to major international outsourcing contracts such as those concluded with Siemens and Shell. In Germany, by contrast, revenue fell by 13.6 percent to EUR 4.0 billion.

  • The Business Customers segment reported a decline in revenue of 10.2 percent to approximately EUR 5.3 billion, due to the realignment with the sale of Media & Broadcast at the start of the year and the reassignment of Active Billing to T-Home.

  • Another factor was the reduction in intragroup revenue, which fell 17.8 percent year-on-year. This decrease illustrates T-Systems' substantial contribution to Deutsche Telekom's cost-cutting program. In organic terms, i.e. adjusted for the revenue from Media & Broadcast and Active Billing in 2007 and exchange rate effects, total revenue decreased by 3.0 percent in the first half of 2008.