OREANDA-NEWS. August 12, 2014. T-Mobile US exceeds the 50-million customer mark and raises guidance on customer figures for the full year

Germany business strong in mobile communications and VDSL roll-out areas

Europe increases profitability and efficiency

Revenue down 0.3 percent in the quarter to EUR 15.1 billion, adjusted EBITDA up 0.3 percent to EUR 4.4 billion

Capital expenditure up again by 6.2 percent in the second quarter

For Deutsche Telekom, the second quarter of the current year was dominated by an improved earnings trend. Adjusted EBITDA was up slightly by 0.3 percent to EUR 4.4 billion. At the same time, the Group's total revenue remained more or less on a par with the prior-year level, down 0.3 percent to EUR 15.1 billion, leading to an adjusted EBITDA margin of 29.3 percent compared with 29.1 percent in the prior-year period.

In organic terms, i.e., adjusted for changes in the composition of the Group and currency effects, revenue was up 0.6 percent in the second quarter; adjusted EBITDA was slightly down by 0.3 percent. For comparison, the organic decline in EBITDA stood at 8.3 percent in the first quarter.

"Our strategy so far has been to make bold and prudent investments, focus first on lifting customer numbers, and then on upping revenues and results. And we are now starting to reap the rewards," said Tim Hottges, Chairman of the Board of Management of Deutsche Telekom. "We are also gaining more customers thanks to our outstanding networks, and this success is being reflected more and more in our financial figures."

Deutsche Telekom invested EUR 2.2 billion in the second quarter, which in terms of cash capex before mobile spectrum was 6.2 percent more than in the prior-year period. Substantially more was invested between April and June in Germany with an increase of 58.1 percent to more than EUR 1 billion. Nevertheless, at Group level, free cash flow was just 5.4 percent below the prior-year level at EUR 1.0 billion, and was therefore in line with the forecast.

Reported net profit increased by 34.2 percent to EUR 711 million, driven by positive effects on earnings from the spectrum swap with Verizon in the United States. By contrast, adjusted net profit declined 21.5 percent to EUR 636 million, primarily due to increased depreciation and amortization as a result of the increased asset base following the MetroPCS takeover and the investment drive in the United States in the prior year.

Deutsche Telekom confirms its guidance for the full year 2014, with adjusted EBITDA expected to amount to around EUR 17.6 billion. Free cash flow is expected to total some EUR 4.2 billion.

Germany– Fiber-optic products still highly sought-after

In Germany, Deutsche Telekom continues to experience strong demand for the fiber-optic products VDSL and FTTH. In the second quarter, the pace accelerated again compared with the first quarter, with 227,000 new customers. Of these customers, 109,000 came from the wholesale sector, mainly due to the success of what is known as the contingent model. Thus, the total number of optical fiber-based lines climbed by 55 percent within one year to almost 2 million.

The development in the broadband market improved slightly compared with previous quarters, with 7,000 net additions for Deutsche Telekom. The Group recorded above-average growth in new broadband customers in the VDSL roll-out areas. Investments made as part of the network upgrade initiative had a direct positive impact. Among the encouraging developments in the quarter was the increase in the number of Entertain customers to more than 2.3 million, with more than half of new branded fiber-optic-product customers booking Entertain as an add-on. The IP transformation is also progressing well. As of the end of the second quarter, 3.2 million retail lines had already been migrated – more than twice as many as a year earlier.

Deutsche Telekom held its lead in mobile communications. Mobile service revenues declined only slightly in the second quarter by 0.3 percent compared with the prior-year period. Deutsche Telekom's market share of service revenues increased by 0.6 percentage points year-on-year to 35.5 percent. The mobile contract customer base grew by 275,000 between April and June, including 198,000 new customers under the Deutsche Telekom and Congstar brands.

In its home market, Deutsche Telekom's financial KPIs remained stable. Revenue in the Germany operating segment fell 1.8 percent against the prior-year period in the second quarter of 2014, to EUR 5.5 billion. Adjusted EBITDA was down slightly by 1.0 percent to EUR 2.3 billion, resulting in an adjusted EBITDA margin of 41.3 percent, a clear improvement of 0.7 percentage points compared with the second quarter of 2013.