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Andreas Fuchs

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Deutsche Telekom continues growth course on both sides of the Atlantic and raises full-year guidance

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  • Net revenue increased by 32.3 percent to 26.4 billion euros in the first quarter of 2021
  • Adjusted EBITDA AL up 41.3 percent to 9.2 billion euros 
  • Free cash flow AL doubled to 2.6 billion euros
  • Net profit up by 2.2 percent to 936 million euros
  • German broadband business remains strong
  • United States – synergies ahead of plan

Deutsche Telekom makes a flying start to the new financial year. Net revenue increased by 32.3 percent in the first quarter of 2021 compared with the same period last year to 26.4 billion euros. Adjusted EBITDA AL rose by 41.3 percent to 9.2 billion euros, driven mainly by the acquisition of Sprint in the United States. In organic terms, i.e., adjusted for changes in the composition of the Group and exchange rate effects, revenue increased by 7.1 percent and adjusted EBITDA AL by 8.3 percent.

The Group’s investments in the first quarter – in terms of cash capex excluding spectrum investments – amounted to 4.3 billion euros. That is 27.7 percent more than in the previous year. At the same time, free cash flow AL increased by more than 100 percent to 2.6 billion euros.

“We are sustaining momentum and continuing our successful growth story,” said CFO Christian Illek. “Our customer numbers and key financial metrics are on track on both sides of the Atlantic.”

Net profit was up by 2.2 percent in the first quarter to 936 million euros. Adjusted net profit was down 6.5 percent to 1.2 billion euros. A number of factors contributed to the restrained development in net profit compared to adjusted EBITDA AL: These include higher interest expenses, higher depreciation, amortization and impairment losses, and higher non-controlling interests.

The Group has raised its full-year guidance for 2021. Outside of the United States, Deutsche Telekom now expects adjusted EBITDA AL of around 14.4 billion euros, up from the previous guidance of around 14.3 billion euros, and free cash flow AL of around 3.6 billion euros, up from 3.5 billion euros. Together with the guidance for T-Mobile US, which was raised at the beginning of the month, this means that the Deutsche Telekom Group now expects free cash flow AL to exceed the 8-billion-euro mark, up from the original planning of around 8 billion euros. Similarly, adjusted EBITDA AL is expected to exceed 37 billion euros, up from the previous guidance of around 37 billion euros.

Germany – fiber driving success

Deutsche Telekom’s broadband business continues to develop successfully in the German home market. In the first quarter of 2021, the company recorded 93,000 net broadband additions, i.e., 10,000 more than in the same period last year. The fiber build-out continues to be the basis for this success. At the end of March of this year, the number of fiber-based lines (FTTH, FTTC/vectoring) totaled 16.3 million – that is 1.5 million more than one year ago. In the quarter just ended, net additions stood at 368,000.

Deutsche Telekom won 167,000 new branded mobile contract customers in the first quarter of 2021 compared with 140,000 one year earlier. Mobile service revenues declined year-on-year by 0.8 percent. Excluding the negative effects of the coronavirus pandemic on roaming and visitor revenues, mobile service revenues would have increased by 1.2 percent.

Telekom Deutschland posted EBITDA growth for the 18th consecutive quarter. Adjusted EBITDA AL increased by 3.4 percent year-on-year in the first quarter of 2021 to 2.3 billion euros. At the same time, revenue grew 1.9 percent to 5.9 billion euros. 

United States – Sprint takeover paying off sooner than expected

The integration of Sprint following the business combination effective April 1, 2020, is making further progress. T-Mobile US now expects synergies from the transaction to reach 2.8 to 3.1 billion U.S. dollars in 2021. That is 0.1 billion dollars more than the most recent forecast. On the back of the acquisition, the company’s key financial metrics rose sharply in the first quarter of 2021 compared with the prior year. Total revenue grew by 77.4 percent to 19.9 billion U.S. dollars. With an increase of 97.4 percent, adjusted EBITDA AL virtually doubled to 6.9 billion U.S. dollars.

T-Mobile US’ customer base totaled 103.4 million as of March 31 of this year, up 1.4 million against the year-end. Of these customer additions, 773,000 were postpaid phone customers – again a record figure in the U.S. wireless market.

Europe – sustained growth

The national companies in Europe made it through the first quarter undeterred by the crisis and local lockdowns. Despite the pandemic continuing to negatively affect roaming and visitor revenues, the Europe operating segment posted growth across all key metrics.

Adjusted EBITDA AL rose 4.1 percent year-on-year to 0.9 billion euros in organic terms. Total revenue grew by 0.8 percent to 2.7 billion euros in organic terms.

Customer numbers continued to increase. The national companies added 151,000 new mobile contract customers in the first quarter, 58,000 new broadband customers, and 191,000 new users of fixed-mobile convergence products.

System Solutions – order entry stabilized

The impact of the pandemic continues to be felt in Systems Solutions. In this difficult environment, T-Systems’ key financial metrics largely tracked a stable trend. At 0.9 billion euros in the first quarter of 2021, order entry was on a par with the same period of 2020.

Revenue decreased as expected, down 4.4 percent to 1.0 billion euros. Adjusted EBITDA AL for the period January through March came in at 62 million euros, up 3.3 percent year-on-year.

Group Development – TMNL strong despite lockdown

The Group Development tower business has included the sites in Austria since the start of the year. Adjusted for this inorganic growth, the number of sites increased year-on-year by 1,200 to 42,600. The tower business posted an increase in revenue in the first quarter of 4 percent to 282 million euros in organic terms. At the same time, adjusted EBITDA AL increased by 7.2 percent in organic terms to 169 million euros.

New customer growth in the Netherlands was negatively impacted by shop closures during the renewed lockdown, with T-Mobile NL adding 12,000 mobile contract customers in a very weak overall market. Revenue increased organically by 5.2 percent year-on-year to 513 million euros in the first quarter of 2021. Organic growth in adjusted EBITDA AL was even stronger, up by 6.2 percent to 151 million euros.
 

The Deutsche Telekom Group at a glance



Q1

2021

millions of

Q1

2020

millions of

Change

%

FY
2020

millions of

Net revenue

26,390

19,943

32.3

100,999

Proportion generated internationally

%

76.4

69.7

6.7p

75.5

Adjusted EBITDA

10,698

7,563

41.5

40,374

Adjusted EBITDA AL

9,245

6,544

41.3

35,017

Net profit
(after non-controlling interests)

936

916

2.2

4,158

Adjusted net profit (after non-controlling interests)

1,201

1,284

-6.5

5,715

Free cash flow ALa

2,585

1,287

n.a.

6,288

Cash capexb

12,272

3,570

n.a.

18,694

Cash capexb

(before spectrum)

4,283

3,353

27.7

16,980

Net debt

129,530

77,394

67.4

120,227

Number of employeesc

224,385

206,443

8.7

226,291

Of which in Germanyc

88,409

93,168

-5.1

89,032

Comments on the table:
Sprint has been included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary since April 1, 2020. As a result of the change in the composition of the Group during the year, the remeasured assets and liabilities were recognized as of this date, and all income and expenses generated from the date of first-time consolidation are included in Deutsche Telekom’s consolidated income statement. This affects the comparability of the figures for the current reporting period with the prior-year figures.
a   Before dividend payments and spectrum investment, before interest payments for zero-coupon bonds in the first quarter of 2020, and before repayment of forward-payer swaps at T-Mobile US.
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

2021

millions of

Q1

2020

millions of

Change

%

FY
2020

millions of

Germany

Total revenue

5,942

5,830

1.9

23,790

Adjusted EBITDA AL

2,305

2,230

3.4

9,188

United Statesa

Total revenue

16,483

10,157

62.3

61,208

US-$

19,866

11,198

77.4

70,117

Adjusted EBITDA AL

5,706

3,160

80.6

20,997

US-$

6,876

3,484

97.4

24,033

Europeb

Total revenue

2,729

2,759

-1.1

11,335

Adjusted EBITDA AL

946

936

1.1

3,910

Systems Solutions

Order entry

891

888

0.4

4,564

Total revenue

1,015

1,062

-4.4

4,159

Adjusted EBITDA AL

62

60

3.3

279

Group Developmentb, c

Total revenue

782

708

10.5

2,883

Adjusted EBITDA AL

316

269

17.5

1,101

Comments on the table:
 Reassignment between the operating segments.   
Consistent with efforts to implement the Group strategy pillar “Lead in business productivity,” Deutsche Telekom combined its B2B telecommunications business within its Germany operating segment as of July 1, 2020. This transfer affected the Germany, Europe, Systems Solutions, and GHS operating segments.
Moreover, effective January 1, 2021, Deutsche Telekom reassigned the responsibility for business and profit and loss for Deutsche Telekom IoT GmbH from the Systems Solutions operating segment to the Germany operating segment. Prior-year comparatives for the development of operations, customer numbers, headcount, and order entry were adjusted retrospectively. This internal reorganization does not affect the figures at Group level.
a   Sprint has been included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary since April 1, 2020. Prior-year comparatives were not adjusted.
b   As of January 1, 2021, the Austrian cell tower business was reassigned from the Europe operating segment to the Group Development operating segment. Prior-year comparatives were not adjusted.
c   First-time consolidation of the Dutch MVNO and SIM provider Simpel as of December 1, 2020. Prior-year comparatives were not adjusted.


Operating segments: development of customer numbers in the first quarter of 2021

Mar. 31, 2021

thousands

Dec. 31, 2020

thousands

Change

thousands

Change

%

Germany

Mobile customersa

49,091

48,213

878

1.8

Of which contract customersa

22,509

25,975

-3,466

-13.3

Fixed-network lines

17,562

17,590

-28

-0.2

Broadband lines

14,211

14,118

93

0.7

Of which optical fiberb

9,758

9,515

243

2.6

Television (IPTV, satellite)

3,896

3,864

32

0.8

Unbundled local loop lines (ULLs)

3,968

4,101

-133

-3.2

United Statesc

Customers

103,437

102,064

1,373

1.3

Of which postpaid customers

82,572

81,350

1,222

1.5

Of which prepaid customers

20,865

20,714

151

0.7

Europe

Mobile customers

45,454

45,619

-165

-0.4

Of which contract customers

26,995

26,844

151

0.6

Fixed-network lines

9,117

9,084

33

0.4

Broadband customers

7,001

6,943

58

0.8

Television (IPTV, satellite, cable)

5,105

5,057

48

0.9

Group Development

Netherlands

Mobile customers

6,798

6,803

-5

-0.1

Fixed-network lines

693

682

11

1.6

Broadband lines

680

668

12

1.8

Comments on the table:
Reassignment between the operating segments.   
Consistent with efforts to implement the Group strategy pillar “Lead in business productivity,” Deutsche Telekom combined its B2B telecommunications business within its Germany operating segment as of July 1, 2020. This transfer affected the Germany, Europe, Systems Solutions, and GHS operating segments.
Moreover, effective January 1, 2021, Deutsche Telekom reassigned the responsibility for business and profit and loss for Deutsche Telekom IoT GmbH from the Systems Solutions operating segment to the Germany operating segment. Prior-year comparatives for the development of operations, customer numbers, headcount, and order entry were adjusted retrospectively. This internal reorganization does not affect the figures at Group level.
a From January 1, 2021, around 3.6 million SIM cards of a service provider that were previously reported under contract customers are now reported under prepaid customers. Prior-year comparatives were not adjusted.
b  Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH/B).
c Sprint has been included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary since April 1, 2020. Prior-year comparatives were not adjusted.


Operating segments: development of customer numbers in year-on-year comparison

Mar. 31, 2021
thousands

Mar. 31, 2020
thousands

Change

thousands

Change

%

Germany

Mobile customersa

49,091

46,693

2,398

5.1

Of which contract customersa

22,509

25,416

-2,907

-11.4

Fixed-network lines

17,562

17,711

-149

-0.8

Broadband lines

14,211

13,813

398

2.9

Of which optical fiberb

9,758

8,787

971

11.1

Television (IPTV, satellite)

3,896

3,678

218

5.9

Unbundled local loop lines (ULLs)

3,968

4,505

-537

-11.9

United Statesc

Customers

103,437

68,543

34,894

50.9

Of which postpaid customers

82,572

47,811

34,761

72.7

Of which prepaid customers

20,865

20,732

133

0.6

Europe

Mobile customers

45,454

45,916

-462

-1.0

Of which contract customers

26,995

26,253

742

2.8

Fixed-network lines

9,117

9,096

21

0.2

Broadband customers

7,001

6,729

272

4.0

Television (IPTV, satellite, cable)

5,105

4,940

165

3.3

Group Development

Netherlands

Mobile customersd

6,798

5,686

1,112

19.6

Fixed-network lines

693

632

61

9.7

Broadband lines

680

616

64

10.4

Comments on the table:
Reassignment between the operating segments.   
Consistent with efforts to implement the Group strategy pillar “Lead in business productivity,” Deutsche Telekom combined its B2B telecommunications business within its Germany operating segment as of July 1, 2020. This transfer affected the Germany, Europe, Systems Solutions, and GHS operating segments.
Moreover, effective January 1, 2021, Deutsche Telekom reassigned the responsibility for business and profit and loss for Deutsche Telekom IoT GmbH from the Systems Solutions operating segment to the Germany operating segment. Prior-year comparatives for the development of operations, customer numbers, headcount, and order entry were adjusted retrospectively. This internal reorganization does not affect the figures at Group level.
a From January 1, 2021, around 3.6 million SIM cards of a service provider that were previously reported under contract customers are now reported under prepaid customers. Prior-year comparatives were not adjusted.
b Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH/B).
c Sprint has been included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary since April 1, 2020. Prior-year comparatives were not adjusted.
d  The acquisition of the Dutch MVNO and SIM provider Simpel effective December 1, 2020 increased the mobile customer base by around 1.0 million. Prior-year comparatives were not adjusted.

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, adjusted EBITDA, adjusted EBITDA AL, adjusted EBITDA margin, adjusted EBIT, EBIT margin, adjusted net profit/loss, adjusted earnings per share, 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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