Deutsche Telekom stands by full-year forecasts after Q2 net profit growth

Deutsche Telekom confirmed its financial guidance for 2014 after reporting a 34.2 per cent year-on-year rise in net profit in the second quarter and a marginal decline in revenues.

The German incumbent generated a profit of €711 million ($951 million) during the quarter on the back of a spectrum swap deal with U.S. operator Verizon. Revenues remained stable compared to the second quarter of 2013 with a marginal 0.3 per cent decline year-on-year, while earnings before interest, depreciation and amortisation (EBITDA) increased by 9.5 per cent to €4.4 billion.

Deutsche Telekom CEO Tim Höttges said the figures show the company is beginning to "reap the rewards" of a strategy involving "bold and prudent investments," and its focus "first on lifting customer numbers, and then on upping revenues and results."

Höttges added that the operator is "gaining more customers thanks to our outstanding networks." Deutsche Telekom hiked its investment in domestic networks 58.1 per cent year-on-year to €1 billion, which comprised just under half of its total capex investment of €2.2 billion in the second quarter.

The figures gave Deutsche Telekom the confidence to confirm its full year targets for EBITDA of around €17.6 billion, and free cash flow of €4.2 billion.

In the U.S. the picture was brighter still. The operator's T-Mobile US business increased its full year growth projections after growing EBITDA 59.6 per cent year-on-year to €1.4 billion in the second quarter. Revenues at the division grew 9.2 per cent year-on-year.

Deutsche Telekom this week reportedly rejected a surprise $15 billion takeover offer for its U.S. business from French operator Iliad. A separate deal to sell T-Mobile US to domestic rival Sprint has since collapsed, reports state.

In a conference call to discuss its results, Höttges said the company remains open to a deal to sell its U.S. business, but hinted there is no need for Deutsche Telekom to offload the business. The CEO said there are currently no offers on the table that would create "value for all T-Mobile US shareholders, compared with continuing the business on its own," Bloomberg reported.

The German incumbent said demand for fibre, VDSL, and fibre to the home (FTTH) products in its domestic market was strong during the second quarter, and that mobile revenues declined marginally. The company increased domestic EBITDA by 2.6 per cent year-on-year to €2.2 billion, despite a 1.8 per cent decline in revenue compared to the second quarter of 2013.

Deutsche Telekom's other European operations saw EBITDA decline 3.8 per cent year-on-year to €1.07 billion in the second quarter, and revenue fall 7.9 per cent year-on-year.

Figures for the first half of 2014 showed positive growth relative to the same period of 2013. Net profit increased from €1.09 billion to €2.52 billion, and EBITDA increased 24 per cent to €10 billion.

For more:
- see Deutsche Telekom's earnings release
- see this Bloomberg article on Sprint's T-Mobile US bid
- see this separate Bloomberg report on Iliad's offer
- see Bloomberg's conference call report

Related Articles:
Xavier who? Iliad owner makes his mark in the U.S.
Entner: DT should take Iliad's T-Mobile offer seriously, even though it's less than SoftBank's
Telefónica Deutschland's E-Plus buy tipped to boost European MVNOs
Jibe Mobile powers Deutsche Telekom joyn expansion in Romania and Slovakia
Deutsche Telekom favourite to replace Verizon as German government comms provider

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