- Revenue up by 3.5 percent in organic terms to 19.5 billion euros
- In organic terms, adjusted EBITDA AL is up by 3.9 percent to 5.9 billion euros in the first quarter
- Free cash flow AL up by 9.6 percent in organic terms to 1.6 billion euros
- Capital expenditures up by almost 20 percent year-on-year
- Customer growth in Germany continues
- Momentum in the United States remains unbroken
- European business on course for sustainable growth
- Positive signs at T-Systems
- Group reconfirms full-year guidance
Deutsche Telekom recorded earnings growth in all areas in the first quarter of 2019, thereby seamlessly continuing the Group’s success from its record year of 2018. In organic terms, i.e., adjusted for exchange rate effects and changes in the composition of the Group, net revenue increased by 3.5 percent to 19.5 billion euros.
To provide better comparability with the prior year, Deutsche Telekom is reporting additional, adjusted KPIs as of this quarter. Adjusted EBITDA AL (after leases) and free cash flow AL eliminate the effect of the new accounting standard IFRS 16 on the reporting of leases. This approach is in line with the major European competitors and was explained in detail at the end of February with the presentation of the 2018 figures. It ensures the comparability of key financial figures with the medium-term forecast from the Capital Markets Day 2018.
Adjusted EBITDA AL rose 3.9 percent year-on-year to 5.9 billion euros in organic terms. Free cash flow AL totaled 1.6 billion euros. In organic terms, it increased by 9.6 percent. The increases in the reported figures, i.e., non-organic performance indicators, were even more pronounced, primarily due to the stronger U.S. dollar compared with the prior-year period and acquisitions in Austria and the Netherlands: On this basis, revenue increased by 8.7 percent, adjusted EBITDA AL by 8.3 percent, and free cash flow AL by 18.1 percent.
“We got off to a successful start to the year,” said Tim Höttges, CEO of Deutsche Telekom. “Deutsche Telekom has much more to offer than just our sensational success in the United States. We are seeing positive trends throughout the Group.”
Cash capex excluding expenses for mobile spectrum stood at 3.7 billion euros, up 19.7 percent against the first quarter of 2018. This increase was attributable to the accelerated network build-out in the United States and further extensive investments to build out and modernize the network in Germany. At 1.2 billion euros and down just 0.6 percent, adjusted net profit remained more or less stable year-on-year. Unadjusted net profit declined 9.3 percent to 0.9 billion euros.
The Group reconfirmed its guidance for the current financial year. Deutsche Telekom expects to report adjusted EBITDA AL of around 23.9 billion euros and free cash flow AL of around 6.7 billion euros for the 2019 full year.
Germany – MagentaTV gains ground
In Germany, the positive business trends of the prior year in terms of customer numbers and financial figures continued in the first quarter of 2019.
4.4 million customers now use MagentaEINS, a convergence product package of fixed-network and mobile communications. That is 17.1 percent more than a year ago. 53 percent of branded mobile contract customers now use MagentaEINS packages, an increase of 9 percentage points in a year.
The number of customers with fiber-optic-based products (FTTH, FTTC/vectoring) increased by 688,000 in the quarter, reaching 12.9 million at the end of March, up 24 percent year-on-year. Interest in these products rose tangibly with the launch of MagentaTV, the next development level in Deutsche Telekom’s IP TV offering. 66,000 new MagentaTV customers were recorded in the quarter just ended, taking the total number to 3.4 million, an increase of 7.1 percent compared with March 2018.
Deutsche Telekom retained its leading position on the German mobile market. Service revenues increased again substantially by 2.8 percent compared with the first quarter of 2018. The trend in adjusted EBITDA AL in the Germany operating segment was also very positive in the reporting period, with an increase of 2.4 percent to 2.1 billion euros. Revenue increased 0.6 percent to 5.4 billion euros.
United States – record setting continues
For the last six years now, T-Mobile US has recorded more than one million customer additions in every single quarter. Between January and March 2019, 1.65 million net additions were recorded, including one million branded postpaid customers. Not only is the company constantly winning over new customers, at the same time, customer loyalty is also increasing. Churn fell yet again to a historic low. For branded postpaid customers, it stood at 0.88 percent in the first quarter, down from 1.07 percent in the prior year.
T-Mobile US’ financial performance indicators also reached unprecedented levels in the first quarter. Total revenue increased by 7.0 percent to 11.1 billion U.S. dollars. Adjusted EBITDA AL reached 3.0 billion U.S. dollars, an increase of 6.2 percent year-on-year.
Europe – boom in convergent product bundles
European national companies remain on course for growth in 2019. While revenue increased by 2.8 percent to 2.9 billion euros compared with the first quarter of 2018, adjusted EBITDA AL increased by as much as 5.2 percent to 0.9 billion euros. The first-time consolidation of UPC Austria had a positive effect. In organic terms, revenue increased by 0.4 percent, adjusted EBITDA AL by 1.5 percent.
The business with convergence products bundling fixed-network and mobile communications once again recorded fast growth. Within the space of one year, the number of users of such convergent offers rose 54 percent to 3.8 million. More than 42 percent of broadband households now use convergence products, up more than 10 percentage points within a year. Greece in particular recorded a strong performance.
Systems Solutions – strong development in growth areas
The positive trend in T-Systems’ business from the end of last year continued through the first three months of 2019. At 1.6 billion euros, order entry was up 6.8 percent against the first quarter of 2018, primarily driven by new deals in growth areas such as SAP, public cloud, and health.
Revenue declined 2.1 percent to 1.6 billion euros. There was a general decline in the volume of traditional IT and telecommunications business in Western Europe. T-Systems also terminated contracts in unprofitable business areas. The increase in growth areas was not yet sufficient to fully offset this decline. The results were improved by efficiency enhancements from the ongoing transformation of T-Systems. Adjusted EBITDA AL recovered compared with the prior-year quarter, which had been impacted by start-up costs for new business areas. It increased by 53 percent to 92 million euros.
The Deutsche Telekom Group at a glance:
Comments on the table:
The new IFRS 16 “Leases” accounting standard has been applied since January 1, 2019. This led to a change in the definition of some of our financial performance indicators. The published prior-year figures were not adjusted; however, we show prior-year comparatives calculated on a pro-forma basis for the redefined key performance indicators “adjusted EBITDA after leases (adjusted EBITDA AL)” and “free cash flow after leases (free cash flow AL)”.
a Before dividend payments and spectrum investment.
b Cash outflows for investments in property, plant and equipment, and intangible assets (excluding goodwill).
c First-time application of IFRS 16 “Leases” as of January 1, 2019: The new standard results in a mathematical increase in net debt of 15.6 billion euros. The Company’s financial position remains unchanged by this.
d At the reporting date.
Operating segments:
Comments on the table:
The new IFRS 16 “Leases” accounting standard has been applied since January 1, 2019. This led to a change in the definition of some of our financial performance indicators. The published prior-year figures were not adjusted; however, we show prior-year comparatives calculated on a pro-forma basis for the redefined key performance indicators “adjusted EBITDA after leases (adjusted EBITDA AL)” and “free cash flow after leases (free cash flow AL)”.
a At the reporting date.
b Inclusion of UPC Austria as of July 31, 2018. Prior-year comparatives were not adjusted.
Development of customer numbers
Operating segments: development of customer numbers in the first quarter of 2019
Comments on the table:
a Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH).
b Inclusion of UPC Austria as of July 31, 2018. Prior-year comparatives were not adjusted.
c Starting in Q2/2018, Deutsche Telekom no longer reports the number of retail broadband lines from a technical perspective. Instead, it reports the number of broadband customers. Prior-year comparatives have been adjusted.
d As of January 1, 2019, the portfolio of M2M SIM cards in Austria was streamlined. 2.4 million customers were deactivated. Prior-year comparatives were not adjusted.
Operating segments: development of customer numbers in year-on-year comparison
Comments on the table:
a Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH).
b Inclusion of UPC Austria as of July 31, 2018. Prior-year comparatives were not adjusted.
c Starting in Q2/2018, Deutsche Telekom no longer reports the number of retail broadband lines from a technical perspective. Instead, it reports the number of broadband customers. Prior-year comparatives have been adjusted.
d As of January 1, 2019, the portfolio of M2M SIM cards in Austria was streamlined. 2.4 million customers were deactivated. Prior-year comparatives were not adjusted.
This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. They are generally identified by the words “expect,” “anticipate,” “believe,” “intend,” “estimate,” “aim,” “goal,” “plan,” “will,” “seek,” “outlook,” or similar expressions and include generally any information that relates to expectations or targets for revenue, adjusted EBITDA, or other performance measures. Forward-looking statements are based on current plans, estimates, and projections, and should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. They include, for instance, the progress of Deutsche Telekom's staff-related restructuring measures and the impact of other significant strategic or business initiatives, including acquisitions, dispositions, and business combinations. In addition, movements in exchange rates and interest rates, regulatory rulings, stronger than expected competition, technological change, litigation and regulatory developments, among other factors, may have a material adverse effect on costs and revenue development. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom's actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom can offer no assurance that its expectations or targets will be achieved. Without prejudice to existing obligations under capital market law, Deutsche Telekom does not assume any obligation to update forward-looking statements to account for new information or future events or anything else. In addition to figures prepared in accordance with IFRS, Deutsche Telekom presents alternative performance measures, e.g., EBITDA, EBITDA AL, EBITDA margin, adjusted EBITDA, adjusted EBITDA AL, adjusted EBITDA margin, adjusted EBIT, adjusted EBIT margin, adjusted net profit/loss, free cash flow, free cash flow AL, gross debt, and net debt. These measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Alternative performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.
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