News
German incumbent highlights positive progress in its home market, but analysts note domestic KPIs were mixed.
Deutsche Telekom posted solid earnings growth in the second quarter of this year, once again underpinned by the strength of its U.S. operation, but the German incumbent also noted positive signs at its domestic business.
Adjusted EBITDA grew by 8.6% – or 9.9% organically – to €5.46 billion in the three months to the end of June, buoyed by a 31.5% increase in the U.S., which contributed €2.17 billion to the total.
Net profit fell by 12.8% to €621 million, while adjusted net profit was down 2.2% to €1.05 billion.
Group revenue was up by 2.2% to €17.82 billion, 66% of which is now generated internationally. The U.S. operations contributed €8.2 billion to the top line, up by 10% year-on-year.
Rapid customer growth at T-Mobile US had a significant impact on revenue growth, Deutsche Telekom said. The U.S. mobile operator added 1.88 million customers during the quarter, taking its overall base to 67.4 million.
But Deutsche Telekom was also keen to point out that it is making progress in Germany, claiming that service revenues at its domestic fixed-line business have stabilised for the first time since market liberalisation.
Analysts at Berenberg described this development as a "positive headline", and were similarly upbeat on a slowing decline in German mobile service revenue and stable domestic EBITDA; the telco posted adjusted earnings of €2.23 billion in its home market, flat on the year-ago quarter.
However, the firm noted that "domestic KPIs were mixed, with line loss and postpaid mobile adds weaker than expected, but decent fibre adds."
Deutsche Telekom lost 122,000 fixed lines in Q2 – fewer than the 134,000 losses it recorded in Q1 – leaving it with 19.97 million in total. Its fibre base grew to 3.58 million, an increase of 291,000 over the three months. Postpaid mobile net adds came in at 156,000, taking the total to 24.1 million.
"Guidance was maintained, but overall we do not see enough here to push the shares further given their strong performance into the quarter," Berenberg said.
