- Group expects pandemic to have only a limited impact on financials; guidance for the year confirmed
- Revenue up 2.3 percent in first quarter to 19.9 billion euros
- Adjusted EBITDA AL up 10.2 percent to 6.5 billion euros
- Adjusted net profit up 8.5 percent year-on-year to 1.3 billion euros
- Strong growth in broadband customers in Germany
- Increase in customer satisfaction
- T-Mobile US continues growth before merger
- Revenue and earnings in Europe up again
- T-Systems’ growth areas gain momentum
Stability in uncertain times. Despite the global spread of the coronavirus and the consequent restrictions imposed in many countries since March, Deutsche Telekom had a strong start to the 2020 financial year. Revenue increased 2.3 percent year-on-year to 19.9 billion euros in the first quarter. Adjusted EBITDA AL rose by 10.2 percent, reaching 6.5 billion euros.
“Deutsche Telekom is an anchor of stability in a global crisis,” said CEO Tim Höttges. “Our networks are working reliably as digital lifelines for society.”
The Group expects the pandemic to have limited impact on revenue, due to, for example, the closure of shops, lower roaming revenues, and companies postponing or canceling IT projects. On the other hand, voice telephony revenue is increasing, for instance, and the mobile churn rate is falling. Taking the offsetting effects and measures into account, the impact on adjusted EBITDA AL is likely to be comparatively low. As such, taking into account all foreseeable consequences of the pandemic, the Group confirms its guidance for the current financial year.
Free cash flow AL decreased by around 0.7 billion euros due to the reduction in factoring. This decision accounted for the decline to 1.3 billion euros. Adjusted net profit increased by 8.5 percent to 1.3 billion euros, unadjusted it increased by 1.8 percent to 916 million euros.
Germany – strong performance in fixed-line and mobile communications
With 83,000 new broadband customers, Deutsche Telekom achieved its best result in two years in Germany. The number of TV customers also increased significantly, with 60,000 new users of MagentaTV. The number of fiber-optic lines (VDSL/vectoring, FTTH) grew by 389,000 between January and March, bringing the total to around 14.8 million at the end of the first quarter, 1.9 million more than a year earlier.
Mobile service revenues also performed well, with a year-on-year increase of 1.7 percent confirming Deutsche Telekom’s market leadership. Mobile branded contract customer additions amounted to 141,000 in the first quarter.
The Germany segment also posted positive trends in its financials. Adjusted EBITDA AL increased by 2.7 percent year-on-year in the first quarter to 2.2 billion euros. Revenue increased by 0.9 percent to 5.4 billion euros.
United States – continued growth in financial figures
T-Mobile US strengthened its position further going into the business combination with its competitor Sprint. The transaction was completed on April 1, 2020 and will be reflected for the first time in the figures for the second quarter. In the first three months of the year, adjusted EBITDA AL grew by 14.5 percent to 3.5 billion U.S. dollars, while revenue grew 0.7 percent against the prior-year level to 11.2 billion U.S. dollars, with mobile service revenues increasing by 5.5 percent.
The number of branded postpaid customers increased by 777,000 in the first three months to 47.8 million. T-Mobile US now has a total of 68.5 million branded customers. In line with other companies in the industry in the United States, the company no longer reports any wholesale customers as of this quarter.
Europe – still on course
Driven primarily by growing fixed-network and mobile service revenues, revenue in the Europe operating segment grew by 2.0 percent in organic terms year-on-year in the first quarter to 2.9 billion euros. Adjusted EBITDA AL rose by 3.4 percent in organic terms to 1.0 billion euros. Thus, the Europe segment began its third year of unbroken growth in every quarter.
The trend in customer numbers also continues to rise. Between January and March, the European national companies acquired 110,000 new mobile contract customers, 65,000 new broadband customers, and 238,000 new users of product packages combining fixed network and mobile communications. More than half of all broadband households now use these convergent offers.
Systems Solutions – earnings up thanks to growth areas
T-Systems managed to offset the expected fall in revenue from traditional IT business with gains in growth areas. The areas of public cloud and security performed particularly well. At 1.6 billion euros, revenue across the whole segment remained at the prior-year level.
The positive trend in the growth areas and the ongoing transformation strengthened profitability. Adjusted EBITDA AL increased by 8.7 percent compared with the first quarter of 2019 to 100 million euros. Order entry declined by 13.4 percent against the strong prior-year quarter to 1.4 billion euros.
Group Development – increase in customer numbers in the Netherlands
The business in the Netherlands continues to grow. In the first quarter of 2020, T-Mobile NL recorded a year-on-year increase of 5.5 percent in mobile service revenues. The number of mobile contract customers increased by another 67,000 in the first three months of the year.
The cell tower business in Germany and the Netherlands grew in line with plans, with the addition of 1,800 sites compared to the end of March 2019. Revenue here increased by 4.7 percent to 247 million euros, while adjusted EBITDA AL rose by 5.1 percent to 145 million euros.
The Deutsche Telekom Group at a glance
Comments on the table:
a Before dividend payments and investments in spectrum, and before interest payments for zero-coupon bonds.
b Cash outflows for investments in property, plant and equipment, and intangible assets (excluding goodwill).
c At the reporting date.
Operating segments: development of operations
Comments on the table:
a At the reporting date.
Operating segments: development of customer numbers in the first quarter of 2020
Comments on the table:
a Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH/B).
b Starting in Q1 2020, T-Mobile US discontinued reporting of wholesale customers due to the expansion of M2M and Internet of Things (“loT”) products and instead will continue to focus on branded customer reporting.
c M2M cards (machine-to-machine) were reclassified Group-wide as of January 1, 2020, and assigned exclusively to the prepaid customer segment. The portion of M2M cards which had previously been recognized in the contract customer segment was reclassified accordingly. Comparative figures have been adjusted retrospectively.
d Prior-quarter comparative for IP-based-fixed network lines in the Czech Republic was adjusted as part of the standardization of the underlying customer definition.
e The prior-quarter comparative for broadband lines in the Netherlands was adjusted as part of the standardization of the underlying customer definition.
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).
b Starting in Q1 2020, T-Mobile US discontinued reporting of wholesale customers due to the expansion of M2M and Internet of Things (“loT”) products and instead will continue to focus on branded customer reporting.
c M2M cards (machine-to-machine) were reclassified Group-wide as of January 1, 2020 and assigned exclusively to the prepay customer segment. The portion of M2M cards which had previously been recognized in the contract customer segment was reclassified accordingly. Comparative figures have been adjusted retrospectively.
d Prior-quarter comparative for IP-based-fixed network lines in the Czech Republic was adjusted as part of the standardization of the underlying customer definition.
e The prior-quarter comparative for broadband lines in the Netherlands was adjusted as part of the standardization of the underlying customer definition.
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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