Deutsche Telekom continues stable growth course in Q3

Deutsche Telekom continues its stable growth course. Net revenue increased by 8.8 percent year-on-year in the third quarter of 2022 to 29.0 billion euros. Even higher was the growth in service revenues, which increased by 12.5 percent to 23.6 billion euros. Adjusted EBITDA AL increased by 8.5 percent in the same period to 10.5 billion euros. The strong year-on-year appreciation in the U.S. dollar of around 17 cents had a significant effect on the reported figures. This resulted in lower levels of growth on an organic basis: Excluding changes in exchange rates and the composition of the Group, net revenue was up 0.5 percent, service revenues 3.4 percent, and adjusted EBITDA AL 0.7 percent.

“We are once again proving to be an anchor of stability in difficult times,” said Tim Höttges, Chairman of the Board of Management of Deutsche Telekom. “Our businesses continue to grow. That puts us in a position to raise not only our guidance – for the third time this year – but also our dividend.”

Free cash flow AL was down slightly year-on-year in the third quarter at 2.9 billion euros. During the same period, capital expenditure of the Group excluding expenses for mobile spectrum totaled 5.6 billion euros worldwide, an increase of 28.0 percent against the prior-year period.

At 1.6 billion euros, net profit was up 77.5 percent on the prior-year quarter. Adjusted for special factors, net profit even increased by 83.6 percent to 2.4 billion euros.

For the third time in the current financial year, Deutsche Telekom has raised its guidance. In organic terms, adjusted EBITDA AL is now expected to come in at more than 37.0 billion euros, up from the previous guidance of around 37.0 billion euros. Adjusted core EBITDA AL, i.e., adjusted for the effects of the withdrawal from the terminal equipment lease business in the United States, is now expected to total more than 35.9 billion euros, up from previously around 35.9 billion euros. Adjusted earnings per share are now expected to reach more than 1.50 euros. The original guidance was over 1.25 euros.

Against the background of the results of the first nine months of 2022, the Board of Management plans to pay out a dividend of 0.70 euros per share, subject to the approval of the Supervisory Board and the shareholders’ meeting. A dividend of 0.64 euros per share had been paid out for the 2021 financial year.

Germany: New rate plans accelerate growth
Telekom Deutschland’s new mobile rate plans are off to a successful start. The branded contract customer base grew by 368,000 in the third quarter, with the new rate plans also contributing to the substantially stronger growth against the prior quarters. Mobile service revenues at Telekom Deutschland increased in the same period by 2.0 percent year-on-year.

Telekom Deutschland’s broadband customer base grew by 63,000 between July and September. Around 80 percent of Telekom’s broadband consumers in Germany now use a fiber-optic-based line (FTTC/vectoring and FTTH). Around 40 percent of the customers have since subscribed to a rate plan offering bandwidths of up to 100 Mbit/s or higher.

Revenue in the Germany operating segment increased to 6.1 billion euros in the third quarter of 2022, up by 2.8 percent against the prior-year period. Growth in adjusted EBITDA AL in the same period was even stronger: up 3.0 percent to 2.5 billion euros.

T-Mobile USA: Customer additions at a record high
With 1.6 million new postpaid customers in the third quarter of 2022, including 854,000 phone customers, T-Mobile US reached record levels and once again posted industry-leading growth. High Speed Internet, i.e., the U.S. company’s mobile internet access product, is also driving further rapid growth. In the third quarter alone, 578,000 customers opted for this offering. A total of over 2.1 million customers are now using the product.

Service revenues at T-Mobile US increased by 4.2 percent in the third quarter compared with the same quarter of the prior year to 15.3 billion U.S. dollars. Adjusted EBITDA AL declined by 0.9 percent to 6.7 billion U.S. dollars. Adjusted core EBITDA AL – i.e., adjusted for the withdrawal from the leasing business – grew by 5.4 percent to 6.4 billion U.S. dollars. T-Mobile US reported a decrease of around 22 percent in the costs incurred for the integration of Sprint against the second quarter of 2022. This indicates that the costs have passed their peak. T-Mobile US raised its guidance across several financial and customer performance indicators. It now expects to unlock synergies from the Sprint merger of between 5.7 and 5.8 billion U.S. dollars in the current year, up from a previous guidance range of 5.4 to 5.6 billion U.S. dollars.

Europe: Development of customer numbers on track
Revenue of the national companies in Europe continues to grow strongly. The organic growth in the third quarter of 5.5 percent was particularly marked. By contrast, growth in adjusted EBITDA AL of 0.5 percent in organic terms was down year-on-year, slowed primarily by the new supplementary telecommunication tax imposed in Hungary and by rising energy costs.

Customer numbers continue to grow at an exceptionally fast rate. Figures were up compared with the previous quarters across the board, with 251,000 mobile contract net additions, 76,000 broadband net additions, and 32,000 TV net additions. The number of customers using fixed-mobile convergence products also maintained its stable growth trend, increasing by 173,000 in the third quarter.

Systems Solutions: Order entry up
T-Systems looks back on a good quarter. Order entry totaled 0.9 billion euros, up 17.0 percent on the same quarter in the prior year, thanks in a large part to a major new deal in the healthcare sector. Revenue remained stable, increasing 0.4 percent to 0.9 billion euros on an organic basis. Adjusted EBITDA AL increased in organic terms by 2.3 percent to 83 million euros.

Group Development: More sites added
In July, Deutsche Telekom agreed to sell a 51 percent stake in GD Towers, the Group’s cell tower business in Germany and Austria, to DigitalBridge and Brookfield. The Group will continue to report on the development of the ongoing business until the transaction is closed. As of the end of the third quarter, GD Towers operated 41,000 sites. GD Towers has commissioned around 1,200 additional sites over the past 12 months.

CT Bureau