Deutsche Telekom: T-Systems considerably improves profitability in the third quarter of 2009

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T-Systems considerably improves profitability in the third quarter of 2009

Nov 05, 2009

International business grows despite general economic crisis.
Revenues within the group and in Germany decrease.

The profitability of T-Systems' business improved considerably once again in the third quarter. Apart from that, the effects of the financial and economic crisis were felt, as they were in the industry as a whole.
Total revenue from Systems Solutions decreased in the third quarter by 7.3 percent year-on-year to EUR 2.1 billion. Business with customers outside Deutsche Telekom generated revenues of EUR 4.5 billion in the first three quarters of 2009, a decrease of 2.8 percent year-on-year which reflects the general situation in the market. Customers are exercising restraint regarding new projects in particular as a result of the global financial and economic crisis. International revenue, by contrast, increased by around 1 percent and continued the positive trend of prior quarters.
Adjusted EBITDA rose 13.8 percent to EUR 231 million in the third quarter. Adjusted EBIT amounted to EUR 64 million compared with EUR 12 million in the prior-year quarter. This lifted the EBIT margin - an important indicator in the systems solutions business - to 3.0 percent from 0.5 percent in the same period of 2008.

The weaker revenue development was attributable to domestic business in particular where earnings declined by 8.5 percent between July and September. In addition, revenues within the Group decreased by a disproportionately high extent of 11.1 percent. This underlines once again T-Systems' contribution to Deutsche Telekom's efforts to cut costs.

T-Systems recorded an 11.7 percent drop in new orders in the third quarter compared with the same period in 2008 to EUR 1.7 billion. The Automotive segment, for example, felt the consequences of the current general economic situation. It is therefore all the more encouraging that T-Systems was able to win major deals, such as with the automotive supplier Continental. T-Systems also won important orders internationally, for example from Nobel Biocare, the world leader in dental solutions. In addition, the anti-trust authorities have approved the takeover by T-Systems of SAP's entire hosting customer base in Europe, which means T-Systems will in the future support the software applications of almost 90 companies at its own data centers.

Systems Solutions operating segment*:

	Q3 2009 millions of Euro	Q3 2008 millions of Euro	Change percent	Q1-Q3 2009 millions of Euro	Q1-Q3 2008 millions of Euro	Change percent	FY 2008 millions of Euro
Total revenue	2,125	2,293	(7.3)	6,410	6,744	(5.0)	9,343
Computing & Desktop Services	952	961	(0.9)	2,785	2,745	1.5	3,877
Systems Integration	370	415	(10.8)	1,174	1,285	(8.6)	1,741
Telecommunications	803	917	(12.4)	2,451	2,714	(9.7)	3,725
Net revenue	1,467	1,553	(5.5)	4,465	4,595	(2.8)	6,368
New orders	1,689	1,912	(11.7)	6,014	7,380	(18.5)	10,235
Profit (loss) from operations	16	(11)	n.a.	54	407	(86.7)	81
EBITDA	183	180	1.7	571	981	(41.8)	862
Adjusted EBITDA	231	203	13.8	673	595	13.1	826
Average number of employees	45,877	46,028	(0.3)	45,063	46,109	(2.3)	46,095

* Comments on the table:
The 160,000 or so business customers transferred from the Systems Solutions operating segment effective January 1, 2009 are shown as part of the fixed-network operations in the Germany operating segment. All prior-quarter and prior-year figures have been adjusted for better comparability.

About T-Systems
Drawing on a global infrastructure of data centers and networks, T-Systems operates information and communication technology (ICT) systems for multinational corporations and public sector institutions. On this basis, Deutsche Telekom’s corporate customer arm provides integrated solutions for the net-worked future of business and society. Some 46,000 employees at T-Systems combine industry expertise and ICT innovations to add significant value to customers’ core business all over the world. The corporate customers unit generated revenue of around EUR 9.3 billion in the 2008 financial year.

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