Deutsche Telekom banks on mobile data amid €7.4B writedown in Q3

Tools

Deutsche Telekom (DT) CEO Rene Obermann brushed aside the third-quarter €7.4 billion writedown on its T-Mobile USA business, and instead told investors that the company plans to spend €2.5 billion boosting its German network to support the growth in data traffic.

Deutsche Telekom CEO Rene Obermann

Obermann

"Demand is currently shooting through the roof," Obermann told Teltarif.de.

Obermann that data volume will increase by a factor of 15 to 20 driven by surging smartphone and tablet usage. He also said network traffic will increasingly come from and the automotive sector as it looks for network access to traffic congestion services, real-time navigation and breakdown alerts.

The DT chief also squashed recent speculation that the German market was about to consolidate, telling Teltarif.de there was adequate room for four operators.

Returning to its third-quarter results, DT reported that EBITDA had slipped 2.6 per cent to €4.78 billion, exceeding the €4.69 billion average estimate compiled by Bloomberg, but taking the telco to its biggest quarterly net loss in a decade.

While prepaid subscriber gains helped the company exceed profit estimates, it reported lower revenues in some European markets such as Germany and Hungary, and T-Mobile USA lost 492,000 postpaid customers in a continuation of its recent track record.

Obermann is said to be attempting to halt a decline in voice revenue and ramp up services such as mobile payments and music streaming. His efforts, according to Bloomberg, to lessen the impact of the European debt crisis through cost cutting may be starting to pay off, while U.S. profits could help his move to reduce T-Mobile USA's gap with larger operators after last month's agreement to merge with prepaid operator MetroPCS.

"They are actively tackling the U.S., and while Europe is very macro-driven, the company is managing the situation well," Ulrich Rathe, an analyst at Jefferies, who recommends holding Deutsche Telekom shares, told Bloomberg. "Taking the U.S. writedown is the right thing to do even if it hurts."

The writ-down was triggered by the MetroPCS deal. DT plans to own 74 percent of the combined, publicly traded entity, though some analysts see the deal as a way for DT to eventually exit the U.S. market.

At a European level, DT CFO Timotheus Hoettges said that there is "no debate" about cutting DT's 50 per cent shareholding in EE, its UK joint venture with France Telecom, ahead of the UK LTE spectrum auction next year.

In its domestic market, the company continues to battle with Vodafone for the top slot among service providers, with revenue from its mobile services falling at a slower pace than in previous quarters.

"We're the only big telecoms provider in Europe that has stuck to its dividend promises," Hoettges said, according to Bloomberg. "Now we'll weigh how we can make reliable plans for the coming years as well."

For more:
- see this Teltarif.de article (translated via Goggle Translate)
- see this Bloomberg article
- see this Reuters article

Related Articles:
Deutsche Telekom pushes for scale with T-Mobile/MetroPCS merger
Deutsche Telekom posts better Q2, but remains downbeat on Europe
Deutsche Telekom targets 'Internet of Things' with new M2M platform
Deutsche Telekom opens M2M platform to solution providers
Deutsche Telekom quashes sell-off speculation, slams regulators
Report: Deutsche Telekom mulls sale of UK, Dutch subsidiaries