- Net revenue up 0.7 percent in organic terms in the third quarter to 27.6 billion euros; high-margin service revenues up 4.1 percent in organic terms
- Adjusted EBITDA AL up 6.2 percent in organic terms to 10.5 billion euros
- Net profit up 21.9 percent to 1.9 billion euros
- Full-year guidance raised for third time
- Dividend to increase to 77 eurocents per share, share buy-backs of up to 2 billion euros planned
- Germany: strong growth in mobile and broadband customer bases
- T-Mobile US: industry leader in customer net additions
- Europe: Growth trend continues
Deutsche Telekom continues to grow in all key performance indicators, raises its guidance for the full year and plans to pay out a higher dividend. In the third quarter, revenue increased by 0.7 percent year-on-year in organic terms – i.e., excluding exchange rate fluctuations and changes in the composition of the Group – to 27.6 billion euros. Service revenues increased by 4.1 percent in organic terms. At the same time, the Group’s adjusted EBITDA AL grew 6.2 percent in organic terms to 10.5 billion euros. The business on both sides of the Atlantic contributed to this. Despite higher capital expenditure in Germany year-on-year, free cash flow AL increased by 61.4 percent to 4.7 billion euros in the quarter.
“In these uncertain times, Deutsche Telekom continues to grow unabated on both sides of the Atlantic,” said Tim Höttges, CEO of Deutsche Telekom. “We want our shareholders to participate in this positive development by way of a higher dividend.”
Deutsche Telekom raised its guidance for the third time this year. For the full year, the Group now expects adjusted EBITDA AL of around 41.1 billion euros and free cash flow AL of more than 16.1 billion euros, in each case 0.1 billion euros more than planned as of the midpoint of 2023. At the start of the year, expectations for adjusted EBITDA AL were still at around 40.8 billion euros, and for free cash flow AL, at more than 16 billion euros. Adjusted earnings per share are still expected to reach more than 1.60 euros.
Reported net profit for Deutsche Telekom increased to 1.9 billion euros in the third quarter of 2023, up by 21.9 percent against the prior year. This reflects both the positive development of earnings from operations and the planned reduction in integration costs incurred in connection with the merger of T-Mobile US and Sprint. Adjusted for these special factors, net profit decreased 5.9 percent to 2.3 billion euros in the three-month period. This decline was attributable to positive non-recurring effects in profit/loss from financial activities in the prior year, which did not recur in 2023. The amount of the dividend depends on recurring adjusted earnings per share, from which one-time effects like this are eliminated. After the first nine months of 2023, recurring adjusted earnings per share stood at 1.22 euros, up 8 percent year-on-year.
Based on this, the Board of Management is proposing to the Supervisory Board, as announced last week, to pay out a dividend of 0.77 euros per share. In the 2022 financial year, a dividend of 0.70 eurocents per share had been paid out. The company is also planning share buy-backs for 2024 with a volume of up to 2 billion euros. This is intended to recoup part of the dilution effect from Deutsche Telekom’s 2021 capital increase. In September 2021, Deutsche Telekom had issued 225 million new shares to Softbank in Japan, by way of a capital increase against contributions in kind, for which it received 45 million shares of its subsidiary T-Mobile US in return. This takes Deutsche Telekom one step closer to achieving its strategic goal of a long-term majority shareholding in T-Mobile US. As of September 30, 2023, it held a 52.1 percent stake in T-Mobile US.
Germany: strong growth in mobile and broadband customer bases
In its home market, Deutsche Telekom recorded a very positive trend in its customer numbers and financial figures in the third quarter. The company once again led the market with 96,000 broadband net additions. 6.7 million or 45 percent of Telekom consumers have now subscribed to a line offering bandwidths of up to 100 Mbit/s or higher. The MagentaTV customer base increased by 51,000 in the quarter to 4.3 million.
The new mobile rate plan structure continues to draw in strong numbers. Telekom recorded 350,000 branded contract customer additions between July and September. Telekom remains market leader in mobile service revenues, which were up 2.9 percent.
Deutsche Telekom has managed to increase its earnings in Germany in every quarter for seven years now. In the third quarter of 2023, adjusted EBITDA AL recorded organic growth of 3.1 percent year-on-year, increasing to 2.6 billion euros. At the same time, revenue increased by 2.1 percent in organic terms to 6.3 billion euros.
United States: industry leader in customer additions
Between June and September, T-Mobile US recorded postpaid net additions of 1.2 million. The year-on-year decline is attributable to the deactivation of SIM cards issued to students during the coronavirus pandemic, which are now no longer required. In the postpaid phone customer segment, which is particularly important for service revenues, net customer additions were on a par with the prior-year level at 850,000. Both figures represent the best in the U.S. mobile industry. Another 557,000 users opted for the fixed-network high-speed internet substitute product in the third quarter, bringing the customer base for this offering to 4.2 million.
The company recorded organic year-on-year growth in service revenues of 4.7 percent in the quarter to reach 15.9 billion U.S. dollars. The key earnings indicator, adjusted core EBITDA, which eliminates effects from the planned withdrawal from the terminal equipment lease business, grew by 12.7 percent in organic terms to 7.3 billion U.S. dollars.
Europe: Growth trend continues
The Europe operating segment once again delivered strong financials. In organic terms, adjusted EBITDA AL increased by 3.3 percent year-on-year in the third quarter to 1.1 billion euros. Revenue generated by the European national companies increased by 3.7 percent in organic terms to 3.0 billion euros. This growth was primarily driven by organic growth of 5.2 percent in mobile service revenues.
Customer numbers in Europe also saw good growth. Mobile contract net adds totaled 223,000, the number of broadband lines increased by 76,000, and the number of TV customers by 52,000.
System Solutions: solid revenue growth
T-Systems can look back on revenue and earnings growth in the third quarter. Order entry fell short of expectations, decreasing by 11.9 percent in organic terms to 742 million euros, which was partly attributable to phasing effects.
Revenue increased organically by 7.1 percent year-on-year to 960 million euros between July and September. Adjusted EBITDA AL increased by 1.2 percent in organic terms to 86 million euros.
The Deutsche Telekom Group at a glance
Comments on the table
Sale of T-Mobile Netherlands
The sale of T-Mobile Netherlands was consummated on March 31, 2022. The entity has not been part of the Group since April 1, 2022.
New partners for the cell tower business
On July 13, 2022, Deutsche Telekom agreed to sell a 51.0 percent stake in in the tower business companies in Germany and Austria (GD Towers) to DigitalBridge and Brookfield. The transaction was consummated on February 1, 2023. Until this point in time, GD Towers had been included as a fully consolidated entity in the figures of the Deutsche Telekom Group. GD Towers is no longer included in the figures for the third quarter of 2023. In the prior-year comparatives (Q3 2022), however, the cell tower business is included for the full three months. The sale resulted in a gain on deconsolidation in the first quarter of 2023 of 12.9 billion euros. The stake in the cell tower business retained by Deutsche Telekom of 49.0 % has been recognized using the equity method since February 1, 2023. Accordingly, the share of net profit/loss is recognized under profit/loss from financial activities (outside of EBITDA AL).
a. Cash outflows for investments in property, plant, and equipment, and intangible assets (excluding goodwill).
b. At reporting date.
Operating segments: development of operations
Operating segments: development of customer numbers in the third quarter of 2023
Operating segments: development of customer numbers in year-on-year comparison
Comments on the table
a. Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH/B).
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 AL, 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 AL, core EBITDA, 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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