Deutsche Tel hit by US losses

T-Mobile USA continues to be a thorn in the side of Deutsche Telekom, with high churn taking its toll on group profits during 2010.
Profit of €3.4 billion was largely flat on 2009, as were revenues which grew less than 1% to €62.4 billion in 2010, as the troubled US business offset strong performances in Europe and in contract services.
Demand for mobile data services was a bright spot for the firm, with revenues up 30% to €4.4 billion year-on-year. Subscribers have also responded well to fixed-line and IPTV services, particularly in the telco’s domestic market.
Tough operating conditions in Europe, including a new tax levied in Hungary, were largely offset by the deconsolidation of T-Mobile UK, which was merged with France Telecom’s Orange in mid-2010. The European operations grew EBITDA 1.5 percentage points to 34.1% during 2010.
While data revenues at T-Mobile USA grew 25.5% year-on-year during the fourth quarter, the division is struggling to cash in on the growth due to high churn rates – down 23,000 in 4Q10, and 318,000 for the full year.
Deutsche Telekom notes that reducing churn is the main priority for Philipp Humm, the new chief of T-Mobile USA who outlined a fresh strategy late January.
T-Systems, the firm’s corporate division, grew revenues 3.8% in 4Q10, with 9% of the figure coming from global operations.
Chief René Obermann said the firm has “battled through the headwind,” of a tough economic environment and even tougher competition, and is sewing the seeds of future success.
“I am particularly pleased about the slight increase in revenue,” Obermann states, adding “At the same time, we have started to implement our new strategy and invested in the future.”
That investment should pay off in 2011 in the form of stable earnings, with EBITDA of €19.1 billion and free cash flow of €6.5 billion predicted.