Thursday, May 5, 2011

Deutsche Telekom Reports Mixed Picture for Q1

Deutsche Telekom confirmed its financial guidance for the full year 2011, as it reported an overall decline in Q1 revenue of 3% compared to a year earlier, positive developments overall in Germany and at T‑Systems, while the companies in the Europe operating segment faced a host of challenges, as did T-Mobile USA. Free cash flow decreased by 26.3 percent to EUR 1.1 billion in the first quarter of 2011. This was largely due to different seasonal influences on capital expenditure and interest payments compared with the prior year.

"We have done our homework correctly. The planned sale of T‑Mobile USA heralded the beginning of a new era for us," explained Ren√© Obermann, Chairman of the Board of Management of Deutsche Telekom. "The course has been set for the Group's realignment and we intend to pursue this course systematically. The figures for the first quarter show, however, that there are further challenges ahead."

Some highlights:

Adjusted for the deconsolidation of T-Mobile UK, which was still included in the figures for the first quarter of 2010, revenue declined by 3.0 percent to EUR 14.6 billion.

Adjusted EBITDA decreased by 5.0 percent to EUR 4.5 billion. Adjusted net profit declined by 27.4 percent to EUR 0.7 billion.

In its fixed-network business in Germany, revenue declined by 4.6 percent in the first quarter, while an increase of 1.3 percent was reported in mobile communications business. Revenue generated with consumers declined by 3.6 percent and revenue in the wholesale area fell by 6.6 percent, while earnings from business customers grew by 2.7 percent.

Mobile data revenue in Germany climbed by 32 percent compared with the first three quarters of 2010 to EUR 384 million. There was a low churn rate of 1.0 percent, 0.3 percentage points below the prior-year figure.

More than 100,000 people in Germany opted for the Entertain IPTV product in the first quarter, pushing the total number of customers up to 1.3 million. At around 46 percent, Telekom retained its large share of the DSL customer base.

For access lines in Germany, there was a drop of 9 percent year-on-year to 339,000 in the first quarter of 2011. For comparison: Two years ago, line losses were still at more than 600,000.

T‑Systems continued its growth course in the first quarter of 2011. Revenue from Systems Solutions increased by 6.1 percent year-on-year to EUR 2.3 billion. This was helped by international revenues, which climbed by 9.4 percent.

For operations in Europe, total revenue adjusted for the deconsolidation of T‑Mobile UK dropped in the first quarter by 8 percent year-on-year to EUR 3.7 billion. The decline in adjusted EBITDA of 13 percent to EUR 1.2 billion was more marked.

T‑Mobile USA lost 471,000 contract customers in the quarter. This was partially offset by growth of 372,000 in prepaid customers. As a result, the overall customer base declined by 99,000 compared with the end of 2010 to 33.6 million. T‑Mobile USA generated revenue USD 5.2 billion, or EUR 3.8 billion -- virtually stable year-on-year. Service revenues even increased slightly by 0.4 percent. Adjusted EBITDA on the other hand declined by 14.5 percent to USD 1.2 billion. Translated into euros, this corresponds to a drop of 13.6 percent. The negative development in results was largely due to higher market investment and network costs.

See also