OREANDA-NEWS. 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 H?ttges, 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:

Q2

2015

millions of

€

Q2

2014

millions of

€

Change

%

H1

2015

millions of

€

H1

2014

millions of

€

Change

%

FY 2014

millions of

€

Revenue

17,428

15,114

15.3

34,270

30,008

14.2

62,658

Proportion generated internationally (%)

64.2

59.6

4.6p

63.6

59.1

4.5p

60.1

EBITDA

4,534

4,417

2.6

8,694

10,055

(13.5)

17,821

Adjusted EBITDA

5,026

4,429

13.5

9,600

8,550

12.3

17,569

Net profit

712

711

0.1

1,499

2,528

(40.7)

2,924

Adjusted net profit

1,078

636

69.5

2,114

1,223

72.9

2,422

Free cash flow

1,375

1,049

31.1

2,240

2,032

10.2

4,140

Cash capex
(before spectrum)

2,575

2,197

17.2

5,105

4,262

19.8

9,534

Cash capex

4,330

3,946

9.7

8,759

6,143

42.6

11,844

Net debt

48,835

41,385

18.0

48,835

41,385

18.0

42,500

Number of employees

225,596

229,897

(1.9)

225,596

229,897

(1.9)

227,811

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.

Operating segments:

 
 

Q2
2015
millions of
€

Q2
2014
millions of
€

Change
%

H1
2015
millions of
€

H1
2014
millions of
€

Change
%

FY 2014
millions of
€

Germany       
Total revenue

5,580

5,464

2.1

11,169

10,947

2.0

22,257

EBITDA

2,102

2,217

(5.2)

4,227

4,422

(4.4)

8,556

Adjusted EBITDA

2,224

2,256

(1.4)

4,435

4,486

(1.1)

8,810

Number of employees

69,607

67,883

2.5

69,607

67,883

2.5

68,754

United States

 

 

 

 

 

 

 

Total revenue

7,443

5,270

41.2

14,348

10,344

38.7

22,408

EBITDA

1,581

1,411

12.0

2,692

2,206

22.0

4,244

Adjusted EBITDA

1,652

1,083

52.5

2,877

1,927

49.3

4,296

Europe

 

 

 

 

 

 

 

Total revenue

3,136

3,163

(0.9)

6,242

6,288

(0.7)

12,972

EBITDA

1,007

1,074

(6.2)

1,960

2,086

(6.0)

4,301

Adjusted EBITDA

1,069

1,098

(2.6)

2,077

2,125

(2.3)

4,432

Systems Solutions

 

 

 

 

 

 

 

Order entry

1,372

1,311

4.7

2,658

2,725

(2.5)

7,456

Total revenue

2,166

2,187

(1.0)

4,167

4,239

(1.7)

8,601

    Of which:

    Market Unit

1,734

1,674

3.6

3,429

3,353

2.3

6,874

Adjusted EBIT margin (%)

1.7

0.4

1.3 p

1.3

0.1

1.2 p

1.5

Adj. EBIT margin, Market Unit (%)

2.0

(0.2)

2.2 p

2.0

(0.3)

2.3 p

2.4

EBITDA

(5)

155

n.a.

75

236

(68.2)

295

Adjusted EBITDA

214

288

(25.7)

368

426

(13.6)

835

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

 

June 30, 2015

thousands

Mar. 31, 2015

thousands

Change

thousands

Change

%

Germany    
Mobile customers

39,465

39,200

265

0.7

Of which contract customers

22,984

22,576

408

1.8

Fixed-network lines

20,437

20,555

(118)

(0.6)

Of which retail IP-based

5,763

5,120

643

12.6

Broadband lines

12,518

12,437

81

0.7

Of which optical fiber

2,365

2,094

271

12.9

Television (IPTV, satellite)

2,578

2,516

62

2.5

Unbundled local loop lines (ULLs)

8,432

8,619

(187)

(2.2)

United States

 

 

 

 

Mobile customers

58,908

56,836

2,072

3.6

Of which branded postpaid customers

29,318

28,310

1,008

3.6

Of which branded prepay customers

16,567

16,389

178

1.1

Europe

 

 

 

 

Mobile customers

55,807

55,849

(42)

(0.1)

Of which contract customers

25,380

25,422

(42)

(0.2)

Fixed-network lines

8,810

8,922

(112)

(1.3)

Of which IP-based

3,779

3,606

173

4.8

Retail broadband lines

5,075

5,038

37

0.7

Television (IPTV, satellite, cable)

3,768

3,741

27

0.7

Comment on the table:
a Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH).

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

 

June 30, 2015
thousands

June 30, 2014
thousands

Change
thousands

Change
%

Germany    
Mobile customers

39,465

39,337

128

0.3

Of which contract customers

22,984

22,379

605

2.7

Fixed-network lines

20,437

21,034

(597)

(2.8)

Of which retail IP-based

5,763

3,167

2,596

82.0

Broadband lines

12,518

12,361

157

1.3

Of which optical fiber

2,365

1,494

871

58.3

Television (IPTV, satellite)

2,578

2,318

260

11.2

Unbundled local loop lines (ULLs)

8,432

9,101

(669)

(7.4)

United States

 

 

 

 

Mobile customers

58,908

50,545

8,363

16.5

Of which branded postpaid customers

29,318

24,530

4,788

19.5

Of which branded prepay customers

16,567

15,639

928

5.9

Europe

 

 

 

 

Mobile customers

55,807

56,485

(678)

(1.2)

Of which contract customers

25,380

25,569

(189)

(0.7)

Fixed-network lines

8,810

9,172

(362)

(3.9)

Of which IP-based

3,779

2,934

845

28.8

Retail broadband lines

5,075

4,849

226

4.7

Television (IPTV, satellite, cable)

3,768

3,619

149

4.1