DT Profit Gains Ease Sting From Failed U.S. Deal

Deutsche Telekom may have failed to clinch a mega-merger in the U.S., yet investors aren’t spooked as Europe’s largest phone carrier charts a path on its own, according to Bloomberg.

Shares of the company rose as much as 1.7 percent in Frankfurt after it raised its full-year profit forecast on solid growth in its home market Germany and customer additions at T-Mobile US, just days after ending merger talks for the unit.

CEO Tim Hoettges is under pressure to show he can maintain T-Mobile’s momentum while winning wireless and broadband clients in Germany and turning around some of the struggling European units. DT's broader financials are intact. Adjusted earnings before interest, taxes, depreciation and amortization will be as much as 22.5 billion euros this year, compared with a previous forecast for about 22.3 billion euros. Adjusted earnings rose 3.3 percent last quarter, the company said.

In Germany, sales advanced 0.1 percent. Mobile-service revenue, a key indicator of how well the carrier can monetize existing wireless contracts, climbed 0.9 percent. The challenge in its home market is to win wireless and business clients in the face of competition from Vodafone, Telefonica and United Internet, which is emerging as a fourth large telecom carrier.

DT will have to focus on operational improvement in Europe, where there are few appealing M&A alternatives. Brexit uncertainty clouds the prospects of the German carrier’s investment in U.K. carrier BT, and some of its other markets, Greece and the Netherlands, either offer limited growth opportunities or are plagued by intense competition. There is an upward trend at units in Hungary, Croatia, Austria, Poland and the Czech Republic, which all reported rising sales.

Deutsche Telekom wrote down goodwill at its computer-services business T-Systems by 1.2 billion euros, saying it expects orders to decrease further in the fourth quarter after a slowdown in the first nine months of 2017. The carrier boosted the full-year earnings forecast for a second time, after projecting adjusted Ebitda of about 22.2 billion euros at the start of the year. The company kept its forecast for full-year free cash flow unchanged at about 5.5 billion euros.