Deutsche Telekom Posts Q1 Loss on T-Mobile Write Down

Germany's Deutsche Telekom has reported a net loss of EUR 1.1 billion (US$1.46 billion) for the first-quarter of this year, compared to a profit of EUR 900 million a year ago. The loss was largely blamed on an expected EUR 1.8 billion (US$2.4 billion) write-down on the valuation of T-Mobile UK. Adjusted profit was EUR 700 million (US$931 million), which is a 12.7% decline on the previous year, reflecting a slight downward trend in operational terms.

The number of mobile customers grew by around 20 million following the inclusion of the OTE subsidiaries, bringing the total customer base, including net additions in the existing mobile companies, to just under 150 million at the end of March.

Deutsche Telekom expects Greece's OTE to boost the Group's adjusted EBITDA by around EUR 2 billion in total over the eleven months of the 2009 financial year since its consolidation. As a result, the Group's guidance needs to be increased by a similar amount, having originally been reduced on April 21 by 2 to 4 percent compared with the prior-year figure of EUR 19.5 billion. Deutsche Telekom expects OTE to contribute around EUR 0.6 billion to free cash flow, bringing the Group total to around EUR 7 billion.

In the first three months of 2009, Deutsche Telekom generated revenue of EUR 15.9 billion (US$21.1 billion), 6.2 percent more than in the first quarter of 2008. Without the inclusion of OTE, revenue in the first quarter was stable at EUR 15 billion and adjusted EBITDA declined 4.8 percent to EUR 4.5 billion.

Fixed-network business in Germany and abroad, mobile business in Germany and across most of Europe, and T-Systems, have thus all developed in line with or slightly above expectations. 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. Year-on-year the Polish zloty lost around 26 percent on the euro and the pound sterling around 20 percent.

"The figures we are presenting today show a mixed picture: Despite the difficult environment in some markets, we are in a relatively stable position," explained Chairman of the Board of Management, René Obermann.

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 subsi-diaries 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. Rapid roll-out of the 3G network will create the potential for further growth.

Posted to the site on 7th May 2009