T-Home expects continued decline in revenue and EBITDA

20 Mar 2008

T-Home, the fixed line division of German incumbent Deutsche Telekom (DT), is forecasting a drop in revenues of between 4% and 6% during 2008, and a decline in EBITDA of 5% to 8%, according to T-Home CEO Timotheus Hoettges. Results for the full year 2007, published last month, showed falls of 8% in revenue and 14% in EBITDA. Hoettges said that the current decline should be stemmed by 2010, when increases in broadband customers will entirely offset losses in fixed line telephony. He added that cost savings of up to EUR1 billion (USD1.57 billion) are expected in the coming year, most of which will be used to attract new customers. The telco hopes to attract an additional 1.6 million DSL customers in Germany by the close of 2008. Hoetgess said that he expects that T-Home’s revenue and EBITDA decreases will level out by 2010, when the fixed line losses have been entirely offset by increases in broadband customers and revenues.

Many analysts interpreted Hoetgess’s remarks, intended to reassure investors, as a profit warning, and DT’s share price fell by 6.9% yesterday, ending the day at EUR10.59.

In an unrelated story, US fund Brandes Investment now owns more than 3% of German DT, making it the third-biggest shareholder, according to a stock market statement. The German state owns 32% of DT (directly and indirectly), while another US fund, Blackstone, owns 4.4%. At yesterday’s share price, Brandes’ stake was worth EUR1.4 billion.

Germany, Deutsche Telekom (DT)