Deutsche Telekom Raises Forecast on Back of Growth in U.S.
Foto: Dražen Tomić - Tomich Productions
Deutsche Telekom forecast higher full-year earnings bolstered by growth in the U.S., according to Bloomberg. The forecast is underscoring that the planned $26.5 billion deal for its T-Mobile US unit to buy Sprint is vital for the German carrier.
DT is defending leading positions in Germany and elsewhere in Europe, where growth is harder to come by, especially as rival Vodafone is bolstering its portfolio with some of Liberty Global’s units. Deutsche Telekom said more customers are selecting two or more of its services in bundles, which increases loyalty as well as phone bills.
“The trends in Germany and the United States are positive,” CFO Thomas Dannenfeldt said in a statement. “At our European subsidiaries, we are again posting sustained growth.” The challenge in Germany, where DT is building fiber lines, is to win wireless and business clients in the face of competition from the combined challenge from Vodafone and Liberty Global, as well as Telefonica and United Internet.
While Deutsche Telekom lost mobile contract customers in Germany compared to the previous quarter, reflecting increased competition, it gained broadband and TV subscribers. And mobile service revenues, a key factor indicating how profitable its wireless contracts can be, rose 2.9 percent from a year earlier.
Its strategy in Europe is to offer wireless, landline and TV services in a bundle called "MagentaEins,” a product that binds customers and helps the company sell additional services including smart-home gadgets and cyber-security software. At the end of the quarter, DT had 3.9 million MagentaEins customers in Germany, about half a million more than a year earlier.
In the U.S., the company is eagerly awaiting approval of its megamerger. While executives from T-Mobile and Sprint have tried to lobby in favor of the stock swap, the regulatory review is only just getting under way and opponents concerned about higher consumer prices for service have until Aug. 27 to file objections to the FCC.
DT also wants approval for the acquisition of Tele2’s business in the Netherlands. European regulators last month green-lighted Their 1.9 billion-euro-purchase of Liberty’s Austrian cable division, boosting the former phone monopoly’s strategy to offer both mobile and landline services there as well.
Deutsche Telekom increased its full-year forecast for adjusted earnings before interest, taxes, depreciation and amortization by 100 million euros to about 23.4 billion euros after T-Mobile posted industry-leading subscriber gains in the second quarter and $176 million in net income, as analysts had predicted a loss.