By Cornelius Rahn - Nov 10, 2011 1:00 PM GMT+0700
Deutsche Telekom AG (DTE), Europe’s largest phone company, reported profit that beat analysts’ estimates after cost cuts boosted profitability in Germany while the T-Mobile USA wireless business added clients.
Third-quarter adjusted earnings before interest, taxes, depreciation and amortization fell 2.3 percent to 4.91 billion euros ($6.7 billion), the Bonn-based company said in an e-mailed statement today. That compared with the 4.71 billion-euro average estimate of 11 analysts compiled by Bloomberg. Net income climbed 15 percent to 1.07 billion euros, also topping estimates.
The former phone monopoly is banking on increased Web traffic over mobile phones and products such as television packages to make up for falling revenue from traditional landlines. It’s also fighting a U.S. government lawsuit against the proposed $39 billion sale of the T-Mobile USA unit to AT&T Inc. (T) That business lost 186,000 contract customers, while on a net basis, it increased clients for the first time in a year.
“We have once again demonstrated that we can stand our ground in a difficult environment,” Chief Executive Officer Rene Obermann said in the statement.
Deutsche Telekom confirmed its full-year forecasts, saying adjusted Ebitda will be about 14.9 billion euros from continuing operations and about $5.5 billion for T-Mobile USA. The company still expects free cash flow to be at least 6.5 billion euros.
Government Stake
Third-quarter revenue decreased 6 percent to 14.7 billion euros, in line with analyst estimates.
The German government, which owns about 32 percent of Deutsche Telekom, said yesterday it may accelerate a plan to dispose of the shares after agreeing to acquire a stake in European Aeronautic Defence and Space Co. from Daimler AG.
Some of Deutsche Telekom’s growth areas have been slowing recently. Domestic competition from cable providers such as Kabel Deutschland Holding AG (KD8) is limiting the operator’s expansion in the broadband and TV business. Selling phone connections and other products may become even harder in coming quarters as European Central Bank President Mario Draghi said last week that the euro-zone economy may dip into recession toward the end of the year.
The company’s German unit pushed the ratio of Ebitda to sales to a record of 41.5 percent last quarter, helped by its 4.2 billion-euro cost-cutting program running from 2010 through 2012. Deutsche Telekom plans additional spending cuts by unifying its information-technology structure over three to four years, people familiar with the plan said last month.
The European unit excluding Germany, led by former McKinsey & Co. consultant Claudia Nemat since October, is aiming to resume revenue growth even as austerity measures brought on by the European debt crisis pare consumer spending.
Vodafone Group Plc (VOD), the world’s biggest wireless operator whose German unit competes in Deutsche Telekom’s home market, this week raised its full-year forecast after beating analyst estimates on improved sales in India and on tiered data tariffs.
To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net
To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net
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