Deutsche Telekom offsets European earnings weakness with strong showing in systems, U.S.

Deutsche Telekom's first-quarter 2016 earnings were broadly in line with analysts' expectations, although the Germany-based operator's domestic and broader European operations continued to show weakness during the period.

Group-wide earnings grew strongly year-on-year in the opening quarter of 2016. Net profit increased from €787 million ($903 million) in the first quarter of 2015 to €3.1 billion in the recent period, though Deutsche Telekom noted that €2.5 billion of that figure came from the sale of its stake in UK joint venture EE to BT during the quarter.

Total revenue increased by 4.7 per cent year-on-year to €17.6 billion in the first quarter of 2016, and adjusted EBITDA of €5.1 billion in the recent quarter was some 12.9 per cent higher than the comparable period of 2015.

However, the bulk of Deutsche Telekom's earnings growth came from its T-Mobile US and systems solutions businesses. Revenue at the U.S. division grew 13.2 per cent year-on-year to €7.8 billion, and adjusted EBITDA increased from €1.2 billion in the first quarter of 2015 to €1.9 billion in the recent period. Systems solutions revenues increased 6.1 per cent year-on-year to €2 billion, and adjusted EBITDA rose from €145 million to €206 million.

Those gains offset weakness in the operator's domestic and European operations in the opening quarter of 2016.

In Germany, total revenues declined 2.5 per cent year-on-year to €5.4 billion and adjusted EBITDA fell 1.4 per cent to €2.1 billion.European revenues declined 2.4 per cent year-on-year to €3 billion, and adjusted EBITDA fell by 3 per cent to €986 million.

Adjusted EBITDA was described as Deutsche Telekom's "main yardstick" measure of earnings by MarketWatch, which reported that group profit in the opening quarter of 2016 beat the €789 million predicted in a poll of analysts by Dow Jones Newswires.

Jefferies International analysts noted that Deutsche Telekom's group revenue in the opening quarter was 1.1 per cent higher than consensus estimates, while adjusted EBITDA was 1.7 per cent higher.

However, in a statement emailed to FierceWireless:Europe, the analysts highlighted that domestic revenues and adjusted EBITDA missed consensus predictions by 1.4 per cent and 1.1 per cent respectively. European revenues "are in line with consensus", the analysts said.

Deutsche Telekom predicted that economic trends in its core markets would remain stable through the remainder of 2016, with Greece its only caveat due to ongoing weakness in the country's economy. However, the German operator forecast that the Greek economy would begin to recover in 2017.

For more:
- see Deutsche Telekom's Q1 earnings report (PDF)
- read this MarketWatch report

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