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Andreas Fuchs

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Deutsche Telekom remains stable in the coronavirus crisis and delivers double-digit earnings growth in the first quarter

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  • 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 H?ttges. “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



Q1

2020

millions of

Q1

2019

millions of

Change

%

FY
2019

millions of

Net revenue

19,943

19,488

2.3

80,531

Proportion generated internationally in %

69.7

69.0

0.7p

69.5

EBITDA

6,940

6,461

7.4

27,120

Adjusted EBITDA

7,563

6,901

9.6

28,708

Adjusted EBITDA AL

6,544

5,940

10.2

24,731

Net profit

916

900

1.8

3,867

Adjusted net profit

1,284

1,183

8.5

4,948

Free cash flowa

2,294

2,370

-3.2

10,133

Free cash flow ALa

1,287

1,557

-17.3

7,013

Cash capexb

3,570

3,827

-6.7

14,357

Cash capexb

(before spectrum)

3,353

3,682

-8.9

13,118

Net debt

77,394

71,876

7.7

76,031

Number of employeesc

206,443

214,609

-3.8

210,533

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



Q1

2020

millions of

Q1

2019

millions of

Change

%

FY
2019

millions of

Germany

Total revenue

5,405

5,357

0.9

21,886

EBITDA

1,974

1,946

1.4

8,319

Adjusted EBITDA

2,170

2,114

2.6

8,744

Adjusted EBITDA AL

2,164

2,108

2.7

8,720

Number of employeesa

59,878

62,358

-4.0

60,501

USA

Total revenue

10,157

9,796

3.7

40,420

US-$

11,198

11,124

0.7

45,236

EBITDA

3,593

3,210

11.9

13,265

Adjusted EBITDA

3,867

3,309

16.9

13,809

Adjusted EBITDA AL

3,160

2,679

18.0

11,134

US-$

3,484

3,042

14.5

12,463

Europe

Total revenue

2,903

2,891

0.4

12,168

EBITDA

1,034

1,035

-0.1

4,313

Adjusted EBITDA

1,073

1,059

1.3

4,460

Adjusted EBITDA AL

963

945

1.9

4,005

Systems Solutions

Order entry

1,393

1,609

-13.4

7,329

Total revenue

1,628

1,630

-0.1

6,805

Adj. EBIT margin (%)

0.8

-0.2

1.0p

2.1

EBITDA

84

79

6.3

314

Adjusted EBITDA

133

125

6.4

645

Adjusted EBITDA AL

100

92

8.7

519

Group Development

Total revenue

708

682

3.8

2,797

EBITDA

333

325

2.5

1,427

Adjusted EBITDA

340

332

2.4

1,330

Adjusted EBITDA AL

269

255

5.5

1,033

Comments on the table:
??? a?? At the reporting date.


Operating segments: development of customer numbers in the first quarter of 2020

Mar.?31, 2020

thousands

Dec.?31, 2019

thousands

Change

thousands

Change

%

Germany

Mobile customers

46,960

46,189

771

1.7

Of which contract customers

25,475

25,291

184

0.7

Fixed-network lines

17,711

17,824

(113)

(0.6)

Of which retail IP-based

17,510

17,479

31

0.2

Broadband lines

13,813

13,730

83

0.6

Of which optical fibera

8,787

8,529

258

3.0

Television (IPTV, satellite)

3,678

3,618

60

1.7

Unbundled local loop lines (ULLs)

4,505

4,638

(133)

(2.9)

USA

Mobile customersb

68,543

67,895

648

1.0

Of which branded postpaid customers

47,811

47,034

777

1.7

Of which branded prepay customers

20,732

20,860

(128)

(0.6)

Europe

Mobile customers

45,916

46,165

(249)

(0.5)

Of which contract customersc

26,354

26,245

109

0.4

Fixed-network lines

9,096

9,105

(9)

(0.1)

Of which IP-basedd

8,347

8,311

36

0.4

Broadband customers

6,737

6,672

65

1.0

Television (IPTV, satellite, cable)

4,940

4,945

(5)

(0.1)

Group Development

Netherlands

Mobile customers

5,686

5,610

76

1.4

Fixed-network lines

632

619

13

2.1

Broadband linese

616

605

11

1.8

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

Mar. 31, 2020
thousands

Mar. 31, 2019
thousands

Change

thousands

Change

%

Germany

Mobile customers

46,960

44,657

2,303

5.2

Of which contract customers

25,475

25,195

280

1.1

Fixed-network lines

17,711

18,414

(703)

(3.8)

Of which retail IP-based

17,510

16,065

1,445

9.0

Broadband lines

13,813

13,608

205

1.5

Of which optical fibera

8,787

7,609

1,178

15.5

Television (IPTV, satellite)

3,678

3,419

259

7.6

Unbundled local loop lines (ULLs)

4,505

5,050

(545)

(10.8)

USA

Mobile customersb

68,543

64,744

3,799

5.9

Of which branded postpaid customers

47,811

43,538

4,273

9.8

Of which branded prepay customers

20,732

21,206

(474)

(2.2)

Europe

Mobile customers

45,916

47,800

(1,884)

(3.9)

Of which contract customersc

26,354

25,674

680

2.6

Fixed-network lines

9,096

9,051

45

0.5

Of which IP-basedd

8,347

7,737

610

7.9

Broadband customers

6,737

6,478

259

4.0

Television (IPTV, satellite, cable)

4,940

4,904

36

0.7

Group Development

Netherlands

Mobile customers

5,686

5,382

304

5.6

Fixed-network lines

632

557

75

13.5

Broadband linese

616

540

76

14.1

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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