- Revenue up by 15.3 percent to EUR 17.4 billion, organic revenue growth of 5.7 percent
- Adjusted EBITDA up by 13.5 percent to EUR 5.0 billion, organic growth of 6.7 percent
- Adjusted net profit up by almost 70 percent
- 3.4 million fiber-optic-based lines in Germany
- T-Mobile US increases adjusted EBITDA by 22.8 percent
Deutsche Telekom reports double-digit growth for the second quarter of 2015. Net revenue rose by 15.3 percent compared with the prior-year period to EUR 17.4 billion. Adjusted EBITDA rose by 13.5 percent to EUR 5.0 billion Organic growth, i.e., excluding exchange rate fluctuations and changes in the composition of the Group, was also strong, with revenue up 5.7 percent in the second quarter and adjusted EBITDA up 6.7 percent.
"We have emphatically confirmed the strong figures from the first quarter," said Tim Höttges, CEO of Deutsche Telekom. "The transformation of the Group is continuing at full speed in all areas. We are heading in the right direction."
The Group is continuing to invest in its future. Investments in terms of cash capex before mobile spectrum expenses increased by 17.2 percent year-on-year to EUR 2.6 billion in the second quarter of 2015. At the same time, free cash flow improved by 31.1 percent to EUR 1.4 billion.
Adjusted net profit was up almost 70 percent to EUR 1.1 billion, due to higher adjusted EBITDA. Reported net profit, i.e., before adjustment for special factors, stood on a par with the prior-year level at EUR 0.7 billion. However, negative special factors in the second quarter were some EUR 0.4 billion higher than in the prior year, due in part to higher expenses for staff-related measures.
Deutsche Telekom confirms its guidance for 2015. Based on a constant exchange rate compared with 2014 of USD 1.33 per euro, adjusted EBITDA is expected to reach around EUR 18.3 billion and free cash flow around EUR 4.3 billion.
Germany – More and more customers are choosing Magenta
The high level of investments in networks is increasingly paying off for Deutsche Telekom on its home market in terms of customer growth. The number of retail broadband customers increased by 81,000 in the second quarter of 2015, the strongest rise in more than three years. Telekom is now expecting around 250,000 net retail broadband additions in the full year instead of the approximately 100,000 forecast at the start of the year.
430,000 retail and wholesale customers switched to a fiber-optic-based product (VDSL/FTTH) for the first time. At the end of the quarter, the number of these lines had increased by almost three quarters year-on-year to 3.4 million. The migration to the IP platform is making rapid progress. 7.8 million lines have now been migrated, 95 percent more than a year earlier. Thus, a third of all of Deutsche Telekom's fixed-network lines have already been migrated.
In mobile communications, network coverage with the LTE standard increased from 77 percent to 85 percent of the population within a year. While the overall market for mobile service revenues shrank slightly year-on-year, Telekom recorded a moderate increase of 0.1 percent and maintained its market leadership.
Total revenue in the Germany segment increased by 2.1 percent year-on-year to EUR 5.6 billion in the second quarter of 2015. Revenue from mobile devices and a stabilization of the wholesale business had a positive effect. At the same time, adjusted EBITDA declined by 1.4 percent to EUR 2.2 billion, with one of the key drivers being higher personnel costs as a result of new hires and taking on junior staff after completion of training for the accelerated network build-out and IP migration.
United States – Un-carrier unstoppable
The T-Mobile US success story continues. The company reported impressive growth figures again for the second quarter of 2015. The customer base grew by 2.1 million, including more than one million branded postpaid customers. T-Mobile US has again raised its forecast for new branded postpaid customers in the full year to between 3.5 and 3.9 million – with its EBITDA guidance unchanged. The churn rate for branded postpaid customers decreased to 1.3 percent, from 1.5 percent a year earlier. With 58.9 million customers, T-Mobile US is now the number three on the U.S. mobile market.
The numerous initiatives of the Un-carrier strategy are increasingly proving their effectiveness. Just recently, T-Mobile US introduced the innovation that customers no longer incur additional roaming charges for mobile calls in the neighboring countries of Mexico and Canada. This applies to both calls from the United States to these countries and to calls made while staying in these countries to the United States as well as within Mexico or Canada.
The ongoing customer rush is increasingly reflected in the key financial figures. Total revenue grew by 13.7 percent compared with the prior-year quarter to USD 8.2 billion. The growth in adjusted EBITDA was even more pronounced, up 22.8 percent to USD 1.8 billion.
Europe – More revenue from growth areas
The pace of network build-out and modernization in the European subsidiaries also continued unabated in the second quarter of 2015. The mobile standard LTE reached population coverage of 60 percent, compared with 38 percent a year earlier. In countries in which we offer both fixed-network and mobile communications, 43 percent of all lines were already IP-based, compared with 32 percent in the prior year. And thanks to fiber-optic products, a bandwidth of at least 100 Mbit/s was available in 17 percent of all households, compared with 13 percent one year ago.
The revenue transformation in Europe also continued to advance. At the end of the second quarter, 28 percent of revenue came from growth areas such as mobile Internet and the Connected Home, compared with 25 percent a year earlier.
Between April and June, the revenue trend in the Europe segment was decent, declining by just 0.9 percent overall. At the same time, adjusted EBITDA declined by 2.6 percent to EUR 1.1 billion, giving an adjusted EBITDA margin of 34.1 percent.
Systems Solutions – Progress in revenue and earnings
T-Systems' most important financial indicators improved in the second quarter of 2015. In the T-Systems Market Unit, which reflects Deutsche Telekom's business with corporate customers, revenue increased by 3.6 percent year-on-year to EUR 1.7 billion. This is also due to positive exchange rate effects to some extent. The key earnings indicators rose as well. Adjusted EBIT in the Market Unit increased to a positive value of EUR 36 million from minus EUR 4 million in the second quarter of 2014. As a result, the adjusted EBIT margin was up from minus 0.2 percent to a positive 2.0 percent. This increase is attributable to efficiency enhancements.
Order entry in the Market Unit increased in the second quarter, primarily thanks to numerous cloud contracts. These contracts resulted from the refocusing of T-Systems to do more business based on scalable, platform-based, and thus per se more profitable offers in digital innovation areas. Growth stood at 4.7 percent compared with the prior-year period. At Telekom IT, which bundles the Group's internal IT business in Germany under the umbrella of T-Systems, revenue declined as planned.
The Deutsche Telekom Group at a glance:
Comments on the table:
a Before dividend payments and spectrum investment.
b Cash outflows for investments in property, plant and equipment, and intangible assets (excluding goodwill).
c At reporting date.
Comments on the table:
a At reporting date.
b First-time inclusion of the GTS Central Europe group since May 30, 2014.
Development of customer numbers
Operating segments: Development of customer numbers in the second quarter of 2015
Operating segments: Development of customer numbers in year-on-year comparison
Comment on the table:
a Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH).
This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward-looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, depreciation and amortization, cash flows, and personnel-related measures. They 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. Among the factors that might influence our ability to achieve our objectives are the progress of our workforce reduction initiative and other cost-saving measures, and the impact of other significant strategic, labor, or business initiatives, including acquisitions, dispositions, business combinations, and our network upgrade and expansion initiatives. In addition, stronger than expected competition, technological change, legal proceedings, and regulatory developments, among other factors, may have a material adverse effect on our costs and revenue development. Further, the economic downturn in our markets, and changes in interest and currency exchange rates, may also have an impact on our business development and the availability of financing on favorable conditions. Changes to our expectations concerning future cash flows may lead to impairment write downs of assets carried at historical cost, which may materially affect our results at the Group and operating segment levels. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, our actual performance may materially differ from the performance expressed or implied by forward-looking statements. We can offer no assurance that our estimates or expectations will be achieved. Without prejudice to existing obligations under capital market law, we do not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise.
In addition to figures prepared in accordance with IFRS, Deutsche Telekom also presents non-GAAP financial performance measures, including, among others, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted net profit, free cash flow, gross debt, and net debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.