T-Online earnings up in 2Q, but customer levels down and DSL take-up disappoints

11 Aug 2004

Germany-based internet services provider T-Online International posted a 62% rise in second-quarter EBITDA to EUR130.6 million for the three months to 30 June, up from EUR80.8 million for the year-ago period, but the sale of its Austrian unit and lower-than-expected DSL take-up left the company with a mixed bag of results. The company reported sales of EUR499.5 million, up 11% year-on-year, but below market expectations of EUR502 million – largely as a result of cost cutting for T-Online’s DSL products. Shares in the ISP have dipped by 15% this month as concerns mount that the company is facing the prospect of a price war in the DSL segment which could eat into its earnings. Although T-Online gained 160,000 new DSL accounts in its home market, the performance has been met coolly with Kai Kaufmann, an analyst at Dresdner Kleinwort Wasserstein, saying they were probably disappointing and certainly below the expectations’. The company is engaged in a bitter battle for subscribers with rivals freenet.de and United Internet, which has forced it to slash prices, impacting heavily on sales and its bottom line. Although T-Online has published full-year sales guidance of around EUR2.25 billion and EBITDA of between EUR400 and EUR450 million, its top line growth is heavily dependent on it continuing to add subscribers – and preferably for the cheaper to provide/install DSL packages. However, the group has lost customers following the sale of its Austrian unit and at the end of June had a total subscriber base of 13.34 million, of which 11.26 million are in Germany.

Germany, T-Online