Revenue increased by 20 % to EUR 35.0 billion after nine months - Cash generated from operations increased by one fifth to EUR 10.4 billion - Net income minus EUR 1 billion - Net debt reduced by EUR 5.8 billion in the third quarter to EUR 65.2 billion - Strong growth in T-DSL, ISDN, mobile and online subscribers Deutsche Telekom Group revenue increased by 19.7 % to EUR 35.0 billion in the first nine months of 2001 year. International business made a disproportionately large contribution to this result, increasing by 68.3 % to EUR 8.9 billion, compared with the same period last year. This strong growth in international revenue illustrates the success of our strategy to internationalize the business base and to develop further growth potential for the future. Domestic revenue also increased by 9 % to EUR 26.1 billion, giving Deutsche Telekom a clear lead in terms of growth over the rest of the industry. Total revenue increased by approximately one quarter in the third quarter of 2001 alone to EUR 12.5 billion.
T-Com contributed 41 % of Group revenue, T-Systems 24 %, T-Mobile International 26 %, T-Online International 3 % and the segment "Other" 6 %. Excluding the U.S. subsidiary VoiceStream (incl. Powertel), revenue increased by approximately 15 % in the first nine months of 2001. VoiceStream generated revenues amounting to approximately EUR 1.5 billion.
Adjusted to exclude special influences to facilitate comparison, EBITDA increased by approximately 15 % to EUR 11.3 billion. The EBITDA increase was mainly due to the very favorable development in the field of mobile communications. Here the adjusted EBITDA more than doubled to EUR 2.2 billion compared with EUR 0.95 billion in the same period last year. With an increase of approximately 20 % to EUR 4.1 billion in the third quarter compared with the third quarter of 2000, growth of adjusted Group EBITDA was higher than in the first three quarters combined.
The Group's net income was approximately minus EUR 1.0 billion in the first nine months of 2001, compared with approximately EUR 8.4 billion in the same period last year. This figure for 2001 includes amortization of goodwill amounting to EUR 1.8 billion as well as UMTS license costs amounting to EUR 0.9 billion. Taking into account these factors, the comparable net income is EUR 1.7 billion compared with EUR 9.6 billion in the same period last year.
The Group's cash generated from operations increased by 20 % to EUR 10.4 billion in the first nine months of 2001. Net cash provided by operating activities amounted to EUR 7.16 billion in the first nine months of 2001, an increase of EUR 187 million against the same period last year. Despite considerably higher net interest payments, net cash provided by operating activities thereby increased further and more than offset the increase in interest payments.
*) defined as net income (adjusted) plus depreciation and amortization
Special influences in the first three quarters of 2001 impacting on EBITDA: Baden-Württemberg cable TV (EUR 908 million), Sprint PCS and Sprint FON shares (EUR 1,845 million). Not impacting on EBITDA but with effect on income before taxes: Valuation adjustments relating to financial assets (EUR -841 million).
Special influences in the first three quarters of 2000 impacting on EBITDA: Global One (EUR 2,864 million), IPO T-Online (EUR 2,657 million), North Rhine-Westphalia and Hesse cable TV (EUR 2,964 million), dilution effect comdirect bank and MTS (EUR 218 million), disposition of noncurrent assets and additions to accruals (EUR -826 million). Not impacting on EBITDA but with effect on income before taxes: WIND (EUR 2,328 million), nonscheduled write-downs copper cable (EUR -971 million).
Net debt considerably reduced Deutsche Telekom further decreased its net debt. Net debt decreased by approximately EUR 5.8 billion in the third quarter of 2001 alone to EUR 65.2 billion. This reduction was mainly attributable to the sale of Sprint PCS shares (EUR 1.6 billion), the sale of the Baden-Württemberg cable TV company (EUR 0.9 billion) and the remaining purchase price of the shares in the Italian company WIND (EUR 2.33 billion).
High demand for T-DSL at T-COM
In the T-Com division, demand for T-DSL lines continued to be strong. Approximately 1.4 million broadband accesses were marketed as of September 30, 2001, an increase of more than 130 % compared with approximately 0.6 million lines sold at the end of 2000. With more than 1.1 million, the number of installed lines increased more than sevenfold, compared with the end of 2000. The number of ISDN lines also continued to increase strongly by approximately 22 % to 19.8 million compared with September 30, 2000.
Compared with the first nine months of the previous year, there was a slight decrease in revenue, EUR 0.2 billion of which is a result of the sale of the cable TV companies sold, whose revenue is no longer included in these figures. On the other hand, the strong demand for T-DSL and T-ISDN was reflected in the EUR 0.3 billion increase in revenue from rental and installation charges.
The EBITDA of the current year has been adjusted to exclude the sale of the Baden-Württemberg cable TV company (EUR 0.9 billion), whereas the sale of the two regional companies of North Rhine-Westphalia and Hesse contributed EUR 2.96 billion to EBITDA in the previous year. The decrease in the adjusted EBITDA is attributable to a large extent to the discontinued EBITDA of the cable regions divested in 2000, which amounted to EUR 0.1 billion.
T-Systems increases EBITDA margin The approx. 42 % increase in T-Systems ? revenue was mainly due to the consolidation of the debis Systemhaus group for the first time. In addition, domestic carrier services and systems solutions for business customers had a positive impact.
Adjusted to exclude the sale of the interest in Global One (EUR 2.86 billion), EBITDA increased rose by approx. 37 % to EUR 779 million. The EBITDA margin thus increased continuously over the first three quarters of 2001 to 7.7 %.
Continued strong growth at T-Mobile
T-Mobile again recorded strong growth in the number of subscribers in the third quarter of 2001: Deutsche Telekom's mobile communications companies and affiliates gained 3.7 million new subscribers in these three months alone, bringing the number of mobile communications subscribers served by the Deutsche Telekom Group to 62.4 million. T-D1 further strengthened its leading market position in Germany with 22.6 million subscribers; this is also true of the contract segment, which accounted for over 60% of all new subscribers in the third quarter of this year.
Besides the revenue growth from the first-time consolidation of VoiceStream (including Powertel) since June 1, 2001, (EUR 1.5 billion) and RadioMobil since April 1, 2001 (EUR 0.3 billion), the considerable growth in the number of subscribers of T-D1 and One2One also had a positive impact on revenues.
The marked improvement of EBITDA reflected in particular, the reduction in subscriber acquisition costs in the pre-pay segment. Almost all of Deutsche Telekom's fully consolidated mobile communications companies achieved significantly improved margins compared to the previous year. The main reason for the reduction in income before taxes was the increased interest expense as a result of the higher level of investment and the amortization of goodwill for VoiceStream / Powertel (EUR 0.5 billion), as well as the increased UMTS amortization (EUR 0.5 billion).
T-Online strong in portal business The strong level of subscriber growth in the T-Online Group continued: The number of European subscribers increased by 576,000 in the third quarter to 9.8 million.
Revenue in the T-Online division - including DeTeMedien - increased 33 % compared with the same period last year; the revenue of the T-Online International Group increased by 49 % to EUR 809 million. Portal revenue increased by 77 % to EUR 108 million in the first nine months of 2001 compared with the same period last year, despite a difficult market environment.
The high EBITDA in the first nine months of 2000 was a result in particular of the proceeds relating to the initial public offering of T-Online and the capital increase of Comdirect (total of EUR 2.76 billion).
Revenue in the segment "Other" increased by 8.5 % from EUR 5.1 billion to EUR 5.6 billion in the first nine months of 2001. This is mainly attributable to the increased revenue from the Hungarian company MATÁV and the companies Maktel (held indirectly via MATÁV) and Slovenské Telekomunikácie, which were not consolidated in the first nine months of 2000.
Special influences had a major impact on EBITDA in the first nine months of both 2000 and 2001. These influences include, in particular, losses from dispositions of noncurrent assets and increased additions to accruals (total EUR 0.8 billion) in the first nine months of 2000. The influences in the first nine months of 2001, on the other hand, included the proceeds from the sale of Sprint FON and Sprint PCS shares (totaling EUR 1.85 billion). The sale of shares in WIND (EUR 2.33 billion) also had an impact on income before taxes in the third quarter of 2000.
Outlook
Deutsche Telekom expects Group revenue to grow by over 15 % for the full 2001 financial year and is aiming for an adjusted EBITDA margin of approximately 30 %. The expected doubling of EBITDA from mobile communications will make a considerable contribution to this development. The Group's net income is not expected to be positive. This will, however, not affect the company's ability to pay dividends.
With the exception of historical information, the matters discussed in this release are forward-looking statements that involve risks identified in Deutsche Telekom's filings with the U.S. Securities and Exchange Commission, particulary in its most recent Annual on Form 20-F.