DT posts Q3 loss on T-Mobile USA writedown

8 Nov 2012

German telecoms giant Deutsche Telekom (DT) has released its financial results for the three- and nine-month periods ended 30 September 2012, reporting stable turnover of EUR14.65 billion (USD18.8 billion) for the third quarter of 2012, while revenue in the first nine months of the year slipped 0.6% year-on-year to EUR43.46 billion. Domestic sales fell 1.7% in 3Q12 and 2.8% in 9M12 to EUR6.438 billion and EUR19.185 billion, respectively, with the international business reporting year-on-year growth of 1.1% for both periods. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 2.6% from EUR4.91 billion in Q3 2011 to EUR 4.77 billion twelve months later, and decreased slightly by 0.9% to EUR13.95 billion in the first nine months of 2012. DT posted a net loss of EUR6.9 billion in the three months ended 30 September 2012, compared to a net profit of EUR1.069 billion in the year-ago period, due to asset impairments at T-Mobile USA. The EUR7.4 billion non-cash special accounting factor resulted from an impairment charge relating to an agreement to merge T-Mobile USA with rival MetroPCS. ‘We made a forward-looking decision for our US business in full awareness of the accounting consequences,’ noted DT’s CEO Rene Obermann, adding: ‘Anyone seeing only the clear net loss is overlooking the fact that our operating business is completely on track. Unlike many of our competitors, we offer reliability.’

At EUR5.736 billion, revenue in the Germany operating segment was 1.3% down on the prior-year level in the third quarter, and adjusted EBITDA in 3Q12 declined 2.5% year-on-year to EUR2.401 billion due to increased market investments. Total revenue in the Europe segment declined 5.7% year-on-year in the third quarter of 2012 to EUR3.65 billion, with sales negatively affected by a deteriorating economic environment and regulatory interventions ‘such as the reduction in mobile termination rates in nine out of 13 countries’. In combination with special taxes imposed in a number of countries, the negative impact on revenue in the third quarter amounted to more than EUR100 million compared with the prior-year period. Adjusted EBITDA meanwhile decreased by 4.3% to EUR1.328 billion. T-Mobile USA reported a 5.9% year-on-year drop in third quarter 2012 revenue to USD4.9 billion, with adjusted EBITDA decreasing as expected by 14.2% to USD1.2 billion as a result of increased spending on advertising. In euro terms, however, the strong development of the US dollar exchange rate had a positive impact, with revenue increasing by 6.3% and adjusted EBITDA declined by 3.0%.

In operational terms, at the end of September 2012 DT’s domestic wireless subscriber base stood at 35.994 million (up from 34.905 million a year earlier), while retail fixed broadband connections increased by 1.8% year-on-year to reach 12.424 million. Pay-TV access meanwhile surged by 38.6% against end-September 2011 to 1.906 million. Internationally, the group’s US subsidiary ended the first nine months of the year with 33.327 million mobile subscribers, down 1.1% against the same date a year earlier, while across all of its European operations (excluding the UK) DT’s wireless voice customers numbered 61.536 million, up 3.5% from 59.467 million twelve months earlier. The biggest gains were seen in Poland, where T-Mobile subscribers increased by 16.2% to 15.575 million, and Bulgaria (up 6.6% to 4.441 million). The Netherlands business, meanwhile, saw its mobile subscriber base dip by 3.5% from 4.935 million at end-September 2011 to 4.761 million a year later.

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