DT posts drop in Q1 net profit, confirms guidance

6 May 2011

German telecoms group Deutsche Telekom (DT) has reported revenues of EUR14.597 billion (USD21.5 billion) for the first three months of 2011, representing a drop of 3% compared to the year ago period. The figures have been adjusted for the deconsolidation of T-Mobile UK, which was still included in the figures for the first quarter of 2010. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the three-month period totalled EUR4.48 billion, down 5% year-on-year, while net profit dropped 43% to EUR480 million and adjusted net profit fell 27% to EUR701 million. On a reported basis – i.e. including T-Mobile UK’s operations in the prior-year figures – DT saw revenue fall 7.7% year-on-year, while net profit for the first quarter of 2011 dropped 37%. DT confirmed its outlook for the full year 2011; the firm expects adjusted EBITDA of EUR19.1 billion, including a USD5.5 billion contribution from T Mobile USA, which DT agreed to sell to AT&T earlier this year in a USD39 billion deal (subject to legal and regulatory approval in the US).

DT said its domestic market largely enjoyed encouraging development during Q1 2011, including a 3.7% year-on-year increase in adjusted EBITDA to EUR2.38 billion, although revenue fell 3.2% compared to the year-ago quarter, to EUR5.99 billion, mainly due to a reduction in mobile termination rates. DT’s German fixed line business saw revenue decline by 4.6% in the first quarter, while an increase of 1.3% was reported in its mobile communications business, driven by a 32% jump in mobile data revenue, to EUR384 million. During the first quarter of 2011 DT added over 100,000 ‘Entertain’ IPTV customers, pushing the total number of customers up to 1.26 million at 31 March 2011. At the same date, the company reported 34.57 million wireless subscribers, down 10% from 38.54 million a year earlier, while fixed telephony lines dropped 6% year-on-year to 24.312 million. At the end of March 2011 DT said retail broadband lines reached 12.069 million, an increase of 3.5% compared to the same date a year earlier.

Elsewhere, the German company said the earnings situation in the US and Europe segments was impacted by a number of factors, including a difficult competitive environment, intervention by the regulatory authorities and tax burdens. DT’s Europe business saw a 24% year-on-year drop in net revenue to EUR3.5 billion, while adjusted EBITDA fell 23% to EUR1.23 billion, with results affected by the macroeconomic situation in countries such as Greece and Romania. The US division, which has been classed as a discontinued operation since Q1 2011, saw revenue fall 1% year-on-year to EUR3.77 billion, while adjusted EBITDA dropped 14% to EUR871 million, driven by the loss of 471,000 contract customers in the quarter. At 31 March 2011 T-Mobile USA had a total of 33.63 million wireless customers, down by around 78,000 from a year earlier.

Germany, Deutsche Telekom (DT), T-Mobile US, Telekom Deutschland