Archive

Archive

Media

Deutsche Telekom with double-digit increase in revenue in the first quarter of 2002

  • Group revenue increased 15 % to EUR 12.8 billion
  • Group EBITDA grew by 4.4 % to EUR 3.8 billion
  • Cash generated from operations increased 14 % to EUR 2.9 billion
  • T-Mobile doubled EBITDA, which increased by EUR 621 million to approximately EUR 1.2 billion
  • Increase in net loss from EUR - 0.4 billion to EUR -1.8 billion, mainly due to amortization for newly consolidated companies

In a weak overall economic environment, Deutsche Telekom increased Group revenue by 15 % to EUR 12.8 billion in the first three months of 2002 compared to EUR 11.1 billion in the first quarter of last year. The U.S. mobile communications companies VoiceStream/Powertel, which were not consolidated in the first three months of the previous year, accounted for EUR 1.4 billion of international revenue. The T-Mobile and T-Online divisions recorded the strongest growth rates, with T-Com revenue remaining at the same level as in the previous year. Revenue generated by T-Systems in the first quarter slightly decreased. T-Com contributed 49 % of Group revenue, T-Systems 15 %, T-Mobile International 32 %, T-Online 3 % and the "Other" segment 1 %. International revenue increased from EUR 2.3 billion in the first quarter of 2001 to EUR 4.3 billion, equating to a growth of approximately 86 %. The proportion of Group revenue generated outside Germany therefore increased to 33 % in the first quarter of 2002 compared to 21 % in the same period last year.

Group EBITDA increased 4.4 %, from EUR 3.6 billion to EUR 3.8 billion compared with the same period of last year. Net loss in the first quarter of 2002 amounted to EUR - 1.8 billion compared to EUR - 0.4 billion in the first quarter of 2001. This includes amortization for newly consolidated companies amounting to EUR 1 billion. Adjusted for negative special influences, this net loss amounts to EUR - 1.4 billion. The special influences include the nonscheduled write-down on the net carrying amount of the stake in France Telecom (EUR 0.2 billion) as a result of the decrease in France Telecom's share price, further write-downs on financial assets (EUR 0.3 billion) and the continued positive tax effect derived from offsetting the loss from the write-down of the net carrying amount of the investment in Sprint and other tax effects (EUR 0.1 billion).

Cash generated from operations in the first quarter amounted to EUR 2.9 billion compared to EUR 2.5 billion in the same quarter of 2001.Deutsche Telekom expects significant growth in revenue to continue and a further increase in EBITDA throughout the entire 2002 financial year.

Restructuring of segment data With regard to the repositioning of the T-Com and T-Systems divisions, Deutsche Telekom's Board of Management has decided to adjust the allocation of specific areas to the T-Com, T-Systems and "Other" segments as of January 1, 2002. The national carrier services business is being transferred from T-Systems to T-Com, and the international carrier services business from T-Com to T-Systems. Furthermore, the in-country business, which is influenced by regulatory issues, is reported in the T-Com division. As part of this measure, the subsidiaries in Eastern Europe, MATÁV, Slovenské Telekomunikácie and Hrvatske telekomunikacije, have now been transferred from "Other" to T-Com. T-Com focuses on national markets (Germany, countries within Central and Eastern Europe). This should not only facilitate the transfer of know-how but should also help to realize further synergies. With the allocation of the international carrier services business, T-Systems is being positioned as a network-centric IT/telecommunications provider.

All the information in the following commentaries on T-Com, T-Systems and Other, including the number of employees, are reported in accordance with the new structure in respect of the first quarter of 2002, the first quarter of 2001 and also the full 2001 financial year.

The structural shifts in the divisions have no effect within the Group as a whole.

The T-Com Division During the first quarter of 2002, T-Com has already implemented appropriate measures in order to focus on profitability and safeguarding results within Germany. These efforts have been taken in order to counter the decrease in revenue and EDITDA reported in the first quarter in Germany during the remaining months of the year. Revenue from access business increased in the first quarter of 2002 by around EUR 0.15 billion to EUR 1.8 billion compared to the same period last year, largely offsetting the loss in call minutes accounting for EUR 0.2 billion.

Some mobile carriers now interconnect their networks directly with each other. At the same time, the structural changes in the calculation of interconnection charges at the beginning of 2002 resulted in an average price reduction of 14 %. As a result of both effects, the revenue from the carrier services business decreased by around EUR 0.2 billion. In addition, the deconsolidation of the Baden-Württemberg cable business and decreases in other areas, such as terminal equipment and data communications, contributed to the reduction in revenue.

At international level, T-Com continued to expand its business, with international revenue increasing by 55 % to EUR 0.9 billion in the first quarter. As a result, the revenue growth recorded by the Eastern European subsidiaries mostly offset the decrease in revenues in the domestic business.

The decrease in EBITDA is attributable, in addition to the revenue influences already described, to the growth in losses from accounts receivable from other carriers. EBITDA generated by the Eastern European shareholdings on the other hand increased by EUR 0.2 billion to EUR 0.4 billion in the first quarter of 2002 compared to the same period last year. The consolidation of Hrvatske telekomunikacije (EUR 0.1 billion) is the primary reason for this increase.

The increase in depreciation and amortization, in particular amortization of goodwill, is due to the full consolidation for the first time of Hrvatske telekomunikacije. Moreover, during 2002, it will be examined whether a valuation adjustment is necessary for that part of the report relating to MATÁV in accordance with U.S. GAAP.

T-ComQ1/2002Q1/2001Total in 2001
millions of EURmillions of EURmillions of EUR
Total revenue7,4407,49929,419
Net revenue6,2836,33725,028
EBITDA adjusted2,4672,68110,124
Depreciation and amortization(1,326)(1,259)(5,443)
Financial income (expense), net(447)(100)(859)
Income (loss) before taxes6941,3224,614
Employees154,983147,771148,247

The T-Systems Division T-Systems' IT business developed positively, the main growth drivers being Systems Integration followed by Computing Services (outsourcing projects) and Desktop Services. The convergence business comprising Application Service Provision and Hosting Services also grew significantly. Network Services revenues decreased, partly due to time delays in major projects and limited orders from key accounts. The main reasons for this increase in EBITDA included cost savings in the individual areas, the consistent consolidation of data centers and more favorable terms and conditions for purchasing international network capacities.

T-SystemsQ1/2002Q1/2001Total in 2001
millions of EURmillions of EURmillions of EUR
2,652 2,804 11,899
Net revenue1,8741,9928,316
EBITDA adjusted258147886
Depreciation and amortization (356) (326) (1,372)
Financial income (expense), net (2) 21 115
Income (loss) before taxes (100) (158) (382)
43,685 41,140 41,716

The T-Mobile Division

The increase in total revenue in the first quarter of 2002 was attributable not only to the positive effects of the consolidation for the first time of RadioMobil from April 1, 2001 and the U.S. mobile communications provider VoiceStream/ Powertel from June 1, 2001, but also to the increased subscriber figures at T-Mobile UK. EBITDA of the T-Mobile segment increased by just over EUR 0.6 billion, roughly doubling to EUR 1.2 billion. The EBITDA margin increased from 22.0 % to 27.1 %. This was not only due to the fact that VoiceStream / Powertel's EBITDA contribution of EUR 0.1 billion was positive for the first time, but is also a result of the positive development of the European subsidiaries and associated companies. In the first quarter of 2002, the key operational majority shareholdings in Europe contributed over EUR 1.1 billion to the EBITDA of this segment.

The increase in depreciation and amortization is primarily due to the fact that VoiceStream / Powertel had not been consolidated in the first quarter of 2001. EUR 0.4 billion for amortization of goodwill and EUR 0.3 billion for amortization of mobile communications licenses relate to VoiceStream / Powertel. Amortization of UMTS licenses in the first quarter of 2002, including the newly acquired license in the Czech Republic, totaled EUR 0.2 billion, the same level as in the previous year. Depreciation of property, plant and equipment increased by EUR 0.3 billion to EUR 0.6 billion, primarily as a result of VoiceStream / Powertel.

T-MobileQ1/2002Q1/2001Total in 2001
millions of EURmillions of EURmillions of EUR
Total revenue4,4652,68114,637
Net revenue4,1152,31812,994
EBITDA adjusted1,2115903,137
Depreciation and amortization(1,729)(689)(6,324)
Financial income (expense), net(322)(563)(3,212)
Income (loss) before taxes(840)(662)(6,399)
Employees37,76919,34930,124

The T-Online Division The increase in total revenue in the T-Online division, including DeTeMedien, was driven by the revenue growth at T-Online International AG. The positive business development in the first three months resulted in strong revenue growth in the T-Online group. As in the previous year, the access business continues to be the strongest revenue driver. There was a disproportionately large increase in non-access revenue, so that its share of total revenue increased considerably. The increase in EBITDA in the T-Online segment, including DeTeMedien, is a result of the positive development at T-Online International AG (German business), which recorded a positive EBITDA once more in the first quarter of 2002. In the first quarter of 2002, the T-Online division recorded EBITDA of approximately EUR 17 million compared with EUR 27 million in the first quarter of 2001. This development reflects the positive impact on results of the increase in efficiency and the economies of scale in the T-Online business in Germany.

T-OnlineQ1/2002Q1 /2001Total in 2001
millions of EURmillions of EURmillions of EUR
Total revenue4273611,449
Net revenue3873561,338
EBITDA adjusted17(27)(78)
Depreciation and amortization(47)(37)(189)
Financial income (expense), net273734
Income (loss) before taxes(3)(27)(233)
Employees2,7273,1383,008

Other

"Other" includes a variety of Group units whose activities cannot be allocated to an individual division. These include, among others, the Deutsche Telekom headquarters, shared services such as real estate, billing, various competence centers and other subsidiaries, associated and related companies of the Group.

The decrease in total revenue in the first quarter of 2002 is a result of lower levels of intercompany charges, whereas net revenue increased by approximately 41 %. This increase in revenue is primarily a result of services provided for call-by-call billing.

The loss before taxes was attributable to the nonscheduled write-down of the net carrying amount of the stake held in France Telecom. Compared with the first quarter of the previous year, the loss increased, on the one hand, as a result of the increased interest expense due to the higher level of net debt and, on the other, due to the decrease in EBITDA.

OtherQ1/2002Q1/2001Total in 2001
millions of EURmillions of EURmillions of EUR
Total revenue9571,1885,114
Net revenue11179633
EBITDA adjusted(28)2191,119
Depreciation and amortization(232)(271)(1,447)
Financial income (expense), net(961)(402)(1,477)
Income (loss) before taxes(1,222)(454)352
Employees17,88818,92218,565

Key figures

Q1/2002Q1/2001Total in 2001
millions of EURmillions of EURmillions of EUR
Total revenue 12,770 11,082 48,309
Domestic8,5188,79335,107
International4,2522,28913,202
Net income (loss)(1,808)(358)(3,454)
EBITDA adjusted3,7823,62215,127
EBITDA3,7823,62218,065
Net cash provided by operating activities2,2631,65011,934
Investments in property, plant and equipment1,4791,5939,853
Number of employees at balance sheet date255,681229,732257,058

Customer breakdown

March 31, 2002 millionsMarch 31, 2001 millionsDec. 31, 2001 millions
Telephone lines (with ISDN channels)57.356.256.9
Aktiv Plus customers (1)9.25.88.4
T-DSL contracts (2)2.30.852.2
ISDN channels21.118.620.4
Mobile communications subscribers
Majority shareholdings (3, 4)50.042.048.9
of which: T-Mobile Deutschland23.020.923.1
of which: T-Mobile UK (One 2 One) (5)10.89.010.4
of which: VoiceStream/Powertel (3)7.55.47.1
of which: T-Mobile Austria (max.mobil.)2.02.12.1
of which: RadioMobil (3)3.02.12.9
of which: Westel (5)2.71.92.5
of which: Hrvatske telekomunikacije (3)1.00.60.9
Proportionate number of subscribers (7)37.934.820.3
Total number of subscribers (8)46.042.124.3
T-Online subscribers11.28.710.7
of which: T-Online (Germany)9.27.18.8
of which: T-Online France (Club Internet)0.90.70.8
of which: Ya.com0.90.80.9
of which: other0.20.20.2

1) AktivPlus rates used 2) T-DSL contracts marketed 3) VoiceStream/Powertel, RadioMobil and Hrvatske Telekomunikacije were not consolidated in the first quarter of 2001, but are shown here pro forma to facilitate comparison. 4) Number of subscribers of the consolidated mobile communications companies. 5) Incl. Virgin Mobile. 6) Held by MATÁV. 7) Proportion of subscribers of all associated mobile communications companies pro-rata to shareholding. 8) Total number of subscribers of the consolidated mobile communications companies and total number of subscribers of other associated mobile communications companies.

With the exception of historical information, the matters discussed in this release are forward-looking statements that involve risks identified in filings with the U.S. Securities and Exchange Commission.

FAQ