Wednesday, November 5, 2008

Deutsche Telekom Reports No Impact Yet from Financial Crisis

Deutsche Telekom's reported revenue for Q3 2008 declined by 1.5 percent to EUR 15.5 billion. On an organic basis, i.e. adjusted for exchange rate effects and excluding changes in the composition of the Group, revenue decreased by 0.9 percent in the third quarter. On a cumulative basis, i.e. in the first nine months of 2008, exchange rate fluctuations reduced revenue by around EUR 1.5 billion. Reported net profit in the third quarter increased by EUR 0.6 billion to around EUR 0.9 billion compared with the same period last year. Net profit adjusted for special factors increased by 12 percent to around EUR 1.2 billion.

Deutsche Telekom asserted that the financial crisis has not yet had an impact on its operations.

"Deutsche Telekom is well positioned in financial terms, our balance sheet ratios are good, and our short and medium-term funding is on a broad and solid footing. We have again made extremely good operational progress in the third quarter and are on the right track to achieving our targets for 2008," said René Obermann, Chairman of the Board of Management of Deutsche Telekom.

Some highlights for Q3:

Mobile Communications

  • Mobile communications remained the Group's growth drivers. Around 1.2 million new contract customers were added in the third quarter alone. Overall, the Mobile Communications companies in the United States as well as in Central and Eastern Europe achieved double-digit growth rates both in terms of revenue as well as EBITDA.

  • T‑Mobile Deutschland reported 271,000 net additions, 82 percent more than in the same period last year. In the first nine months of 2008, growth of 19 percent was recorded, taking the total of new contract customers to 685,000. A significant driver of the encouraging development in the past quarter was the iPhone 3G, which was in extremely high demand following its launch on July 11.

  • T‑Mobile Deutschland reported revenue of EUR 2.0 billion in the third quarter, down 2.8 percent on the same period last year.

  • T‑Mobile USA's results in the third quarter were again significantly affected by the weak U.S. dollar exchange rate. Measured in euros, the company reported a rise in revenue in the third quarter of 2.7 percent and growth in adjusted EBITDA of 1.0 percent.

  • As of the end of September, T-Mobile USA had 32.14 million customers. Including the customers from the acquired company SunCom, this represents an increase of 4.4 million customers within a year. At 670,000, the number of new customers in the third quarter was on a par with the previous quarter.

  • T‑Mobile UK's financial figures are being negatively impacted by tough competition, a weak sterling exchange rate and regulatory intervention in the market. In local currency, revenue in the third quarter fell 6.7 percent year-on-year to GBP 0.8 billion. Adjusted EBITDA decreased by 29.4 percent to GBP 175 million. The rate plans launched in May have been well received by the market. With 96,000 contract additions,

  • The companies in Central and Eastern Europe continue to drive growth in Mobile operations. Revenue in the third quarter increased by 14.8 percent, while adjusted EBITDA climbed as much as 18.9 percent.

  • The trend toward mobile data usage continues unabated. The European national companies recorded revenue -- excluding text and multimedia messaging -- of EUR 380 million between July and September 2008, which represents year-on-year growth of 45.3 percent. The number of web'n'walk customers climbed 67.2 percent to 4.7 million. Including occasional mobile Internet users, i.e. those without data contracts, the figure is much higher -- 13 million.

  • Data revenue in the United States, including messaging, increased by 27.6 percent to US$833 million.

Broadband/Fixed Network

  • T‑Home claimed a 49 percent DSL net add market share in the third quarter, this was the highest level reported by the company since the launch of the resale DSL offer in 2004. Of the 344,000 new DSL customers, around 50,000 were customers returning from competitors. This brings the total of DSL customers won back from resale providers and other network operators to around 150,000 since the beginning of the year.

  • The IPTV service, Entertain, now has around 333,000 customers -- an increase of 33 percent within a single quarter.

  • The number of line losses for the full year is forecasted at 2.5 to 3.0 million. This includes losses due to regulatory measures as well as on technical grounds as a result of the migration of DSL resale customers to All-IP. At 1.8 million in the first nine months of 2008, the number of line losses was at the lower end of this guidance. With 574,000 in the third quarter, the number of line losses was at an annual low.

  • The decline in revenue in the domestic market by 5.9 percent year-on-year to EUR 4.7 billion in the third quarter is primarily attributable to line losses and a drop in call revenues as a result of the higher take-up of flat rate offers. EBITDA decreased by 5.4 percent in the same period to EUR 1.6 billion. On a nine-month basis, revenue declined 5.5 percent and EBITDA 1.6 percent. T‑Home's cost base was reduced by EUR 0.7 billion year-on-year, mainly driven by the "Save for Service" program.

  • Revenue from international business at T-Home declined, chiefly due to the deconsolidation of T-Online France and T-Online Spain in the previous year. The adjusted EBITDA margin of the fixed-network companies in Central and Eastern Europe in the first nine months of 2008 was 42.9 percent compared with 36.4 percent in the same period last year. Broadband growth and positive exchange rate effects at national companies in Eastern Europe did not fully compensate for the decline in the traditional fixed network. At the end of September, the number of IP-TV customers in Eastern Europe was at 164,000, driven mainly by Croatia, with a total of 92,000.

Business Customers

  • T‑Systems' international business saw revenue growth of 5.4 percent. This was primarily attributable to major international outsourcing agreements. In Germany, the business customer arm posted an overall decrease of 12.9 percent to approximately EUR 6.1 billion. This was chiefly due to the sale of Media & Broadcast and the reassignment of ActiveBilling to T-Home, as well as the ongoing price erosion in the telecommunications and IT business.

See also