Deutsche Telekom Reports Stability Despite Economic Headwinds

In the first three months of 2009, Deutsche Telekom generated revenue of EUR 15.9 billion, 6.2 percent more than in the first quarter of 2008. Adjusted EBITDA increased by 2.7 percent to EUR 4.8 billion. Without the inclusion of recently acquired OTE (Greece), revenue in the first quarter was stable at EUR 15.0 billion and adjusted EBITDA declined 4.8 percent to EUR 4.5 billion.


DT's Fixed-network business in Germany and abroad, mobile business in Germany and across most of Europe, and T‑Systems, performed in line with or slightly above expectations during Q1.


In contrast, the mobile communications companies in the United States, the United Kingdom, and Poland all reported decreases, attributable in part to the economic downturn, a more intense competitive environment and, concerning the European companies, to significant changes in exchange rates.


"In most areas of the Group, business is stable," the CEO continued. "But it's clear that we are fighting strong headwinds in some national companies. We have responded to the situation and put in place a comprehensive package of measures," stated CEO René Obermann.


Some highlights from the report:


Mobile Communications


The mobile communications companies in Europe and the United States served over 148 million customers at March 31. This represents a year-on-year increase of 20.6 percent. Revenue increased by 9.0 percent to EUR 9.2 billion. The companies of OTE subsidiary COSMOTE contributed revenue of EUR 0.5 billion. By the end of the quarter, COSMOTE's subsidiaries had 19.9 million mobile customers, including 5.6 million contract customers.


T‑Mobile Deutschland's revenue remained largely stable in the fiercely competitive domestic market, down just 0.5 percent to EUR 1.9 billion. Adjusted EBITDA was EUR 0.7 billion and also declined only slightly by 1.0 percent. The decreases were higher in the same period last year, with revenue down by 3.4 percent and EBITDA 1.1 percent.


T‑Mobile USA reported revenue growth of 19.5 percent to EUR 4.1 billion and an increase in adjusted EBITDA of 9.8 percent to EUR 1.1 billion. Measured in U.S. dollars, the growth in revenue was significantly lower, at 4.1 percent, while EBITDA decreased by 4.4 percent. The impact of the marked downturn in the economic environment was felt as much in the United States as in the United Kingdom and Poland, where negative exchange rate effects further intensified the declining trend in revenue and earnings.


Data business continued to develop positively. In Europe, non-voice revenue increased by more than 40 percent year-on-year to EUR 432 million in the first three months. The Web'n'Walk service is now used by 6.5 million customers in six countries (D, UK, NL, A, CZ, PL). The first quarter alone saw 636,000 customers opting for a corresponding rate plan. This is an increase of 53 percent compared with the same quarter last year. The trend at T-Mobile USA is also positive, where non-voice revenue on a dollar basis increased year-on-year by 31 percent to USD 467 million.


Broadband/Fixed Network


The figures for the Broadband/Fixed Network segment are largely influenced by the first-time inclusion of OTE. Revenue increased by 3.6 percent to EUR 5.9 billion and adjusted EBITDA by 6.2 percent to EUR 2.0 billion. The volume of international business virtually doubled as a result of the consolidation of OTE. Revenue generated outside of Germany totaled EUR 1.1 billion, with adjusted EBITDA at EUR 0.4 billion in the first quarter of 2009. At March 31, Deutsche Telekom's international subsidiaries served around 3.2 million retail DSL customers, including 1.6 million at OTE's subsidiaries in Greece and Romania.


As expected, T‑Home's revenue from business in Germany declined 5.7 percent to EUR 4.8 billion in the first quarter as a result of losses caused by regulatory factors. Thanks to systematic cost discipline, adjusted EBITDA decreased just 2.5 percent in the same period to EUR 1.6 billion. The figures include the new Deutsche Telekom Business Customers business unit with around 160,000 customers. The prior-year figures were adjusted for better comparability.


T‑Home reported a DSL net add market share of around 53 percent; a record high since the complete packages have been introduced. 390,000 new retail broadband customers have been added, up 14.9 percent year-on-year, bringing the number of retail DSL customers to 11 million. The number of line losses in the German fixed network caused by competitive and regulatory factors totaled around 360,000 in the first three months of 2009. In addition, some 240,000 lines were lost as a result of the transfer of DSL resale customers to the all-IP platform.


Systems Solutions


T-Systems' international revenue increased by 6.4 percent and continued the positive development of the prior quarters. This positive trend is partly attributable to contracts signed, for example with Shell and OMG, in 2008. In contrast, revenue in Germany declined 8.2 percent. This decrease in domestic revenue is largely due to the reduced volume of internal business with Deutsche Telekom, which was down 12.4 percent. Total revenue in the first quarter of 2009 amounted to EUR 2.1 billion, a year-on-year decrease of 4.3 percent. External revenues remained virtually stable at the prior-year level, despite the generally difficult market situation.


New orders in the first quarter of 2009 were down 14.7 percent year-on-year. This is mainly because last year's figures included a major deal with Shell.
http://www.telekom.de