Deutsche Tel 3Q profit up 14%

Deutsche Telekom maintained a trend of European incumbents profiting on lower costs during the third quarter, with income up despite lower revenues.

The German incumbent grew net profit 14.6% to €1.1 billion year-on-year during the period, noting that cost cutting is paying off in the form of a 0.5 percentage point rise in EBITDA margin to 35.3%.

Cost cutting measures trimmed €1.5 billion off Deutsche Telekom’s operating costs in the nine months to end-September, leaving the firm on track to meet a goal of reducing its outlay by €4.2 billion in the two years to end-2012.

However, the operator echoed complaints about the impact of regulation made by other European telcos. Lower mobile termination rates in Germany accounted for 1.6% of a 5% fall in domestic revenue to €6 billion in 3Q11, with the remainder of the decline due to lower handset sales.

A combination of regulation – including country-specific taxes - and tough economic conditions stymied the firm’s European businesses during the quarter. Adjusted EBITDA fell 5.3% year-on-year to €1.4 billion, and revenue fell 6.1% to €3.9 billion.

Deutsche Telekom chairman René Obermann hailed a solid performance in difficult circumstances, but notes the firm must not lose focus as a result. "We cannot afford to be complacent in our efforts as the challenges will continue to intensify," he states.

However, the figures left Obermann confident of achieving full year targets of adjusted EBITDA around €14.9 billion and free cash flow of €6.5 billion.