Deutsche Telekom Profits Jump As Costs Fall
Deutsche Telekom has reported a 76.4 percent jump in its second-quarter profits, although that was boosted by one-off costs a year ago that no longer apply. The company's profits were benefiting from a year-on-year decline in special factors of around two thirds to EUR 200 million in the second quarter.
Revenues were essentially flat, down by 0.7% EUR14.4 billion (US$17.8 billion), while net profit rose to EUR 614 million (US$760 million).
The Management also confirmed its guidance for the full year 2012: adjusted EBITDA of around EUR 18 billion and free cash flow of around EUR 6 billion.
"We are keeping our word and providing a good deal of reliability to the market with very solid figures," said René Obermann, CEO of Deutsche Telekom. "We do of course continue to face a number of challenges, but we are performing very respectably compared with our competitors."
At EUR 3.8 billion, the Group invested 5.1 percent less in terms of cash capex in the first half of 2012 than in the prior-year period, representing a slight decline. At the end of the quarter, net debt stood at EUR 41 billion, EUR 2.3 billion less than a year ago.
The mobile contract customer base grew by 464,000 customers in the past quarter. Most of these new customers were added in the reseller segment, which generates lower average revenues per user. The number of line losses fell to a record low once again, dropping to 236,000 between April and June. This represents a year-on-year decrease of 20 percent.
While revenue declined by 3.1 percent to EUR 5.6 billion, adjusted EBITDA from business in Germany decreased by 2.2 percent to EUR 2.4 billion due to higher investments in the market. Service revenues in mobile communications however declined by 1-percent. However, the year-on-year decline was smaller than in the first quarter, when it was 1.8 percent.
Growth in mobile data revenues continued unabated, with a 19-percent increase to EUR 484 million in the second quarter. Twenty-nine percent of ARPU now comes from mobile data compared with 24 percent one year ago.
Rest of Europe
The European national companies continued to hold their ground in a difficult environment between April and June 2012, proving to be particularly strong compared with their competitors. However, with further deterioration in the economic situation of many countries, intense competitive pressure, and regulatory intervention, revenue and earnings still suffered. Added to this were the negative exchange rate effects, in particular those of the Polish zloty and the Hungarian forint.
Consequently, the Europe operating segment saw revenue decline by 5.9 percent to EUR 3.6 billion and adjusted EBITDA decrease by 8.8 percent to EUR 1.2 billion in the second quarter of 2012 compared with the prior-year period. Excluding the exchange rate effects, the decline in revenue and adjusted EBITDA would have been smaller, at 3.8 percent and 6.7 percent respectively.
Turning to the individual national companies, OTE in Greece recorded efficiency gains, with its adjusted EBITDA margin increasing by 2.2 percentage points year-on-year to 36.4 percent in the second quarter of 2012 thanks to successful cost-cutting measures. Cutting costs also had a positive impact on profitability in the Netherlands. T-Mobile Netherlands achieved an adjusted EBITDA margin of 31.7 percent compared with 29.4 percent the previous year.
The number of mobile contract customers across all European companies increased by around 1 million to 27.6 million in the space of a year (including T-Systems' customers in Hungary). Smartphones now account for 60 percent of all devices sold, up from 43 percent one year ago. The more widespread use of smartphones also impacted mobile data revenues, which grew by 21.2 percent year-on-year in Europe, or as much as 24.5 percent when adjusted for exchange rate effects.
T-Mobile USA significantly improved its profitability in the past quarter due to efficiency gains. The adjusted EBITDA margin rose 2.3 percentage points year-on-year to 27.7 percent. With a revenue increase of 8.7 percent to EUR 3.8 billion, adjusted EBITDA increased by 18.6 percent year-on-year to EUR 1.1 billion. Measured in dollars, there was a slight decline of 3.1 percent in revenue for the second quarter of 2012 and an increase of 5.7 percent in adjusted EBITDA compared with the prior-year period.
Customer figures in the United States continue to present a major challenge. While T-Mobile USA did significantly improve its churn rate for branded contract customers year-on-year from 2.6 percent to 2.1 percent, the industry-wide trend toward fewer gross additions resulted in an overall loss of 205,000 customers in the second quarter.
There were 557,000 net losses of branded contract customers. By contrast, the number of branded prepaid customers rose by 227,000, following a loss of 71,000 customers in the second quarter of 2011.
Average data revenue per customer for branded contract customers rose by 15 percent year-on-year in the past quarter to USD19.16.