Hamburg Stagnating sales, falling free cash flow, but record profits: Deutsche Telekom reported mixed business figures for the first quarter of the current year on Thursday morning. Adjusted Group sales remained largely stable in the months from January to March (up 0.3 percent) at EUR 27.8 billion. Organically, it even fell by 0.5 percent due to a one-off effect in the USA.
The service revenues, which are particularly relevant in the industry, increased by 3.5 percent to 22.8 billion euros.
A special effect also came into play when it came to profit. The partial sale of the radio tower business, which was sealed last summer, now also had an effect on the result. The US investors Digitalbridge and Brookfield paid more than ten billion euros for their majority stake in the former subsidiary Deutsche Funkturm in February.
Also thanks to other special effects, the consolidated net profit rose to around 15.4 billion euros, which corresponds to almost a fourfold increase compared to the same quarter of the previous year. “We achieved a record rating back then and you can see that in our figures now,” said CEO Timotheus Höttges. Without this one-off effect, net profit slipped by 12.5 percent to almost two billion euros due to the changed interest rate environment.
The funds raised in the course of the transaction primarily benefited the reduction of record debt. Overall, net liabilities in the first quarter fell by 1.8 percent year-on-year to EUR 133.5 billion. That was around nine billion euros less than at the end of 2022.
T-Mobile US continues to win many customers
Nevertheless, Telekom is still above the maximum target value it has set itself, which is 2.75 times adjusted profit. CFO Christian Illek also admitted that the level of debt will increase again slightly over the course of the year.
The most important part of the group, the US subsidiary T-Mobile, continued to win over new customers. With 1.3 million new contract customers, T-Mobile recorded an increase on the previous year’s level.
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In Germany, after deducting terminations, Deutsche Telekom won 274,000 new mobile phone customers and thus fewer than its competitor Telefónica Deutschland (O2), which had won almost 370,000 people. Vodafone will present the numbers next week. Telekom is currently having to make massive investments in its domestic business in order to potentially supply up to three million households with fiber optics this year alone, as announced.
Infrastructure competition in the fixed network has “increased significantly” in Germany, said CEO Höttges, with a view to the expansion efforts of the fiber optic competition. He welcomed this development, but admitted that Telekom is currently still having difficulties convincing customers of the expensive, particularly fast fiber optic tariffs. In the first quarter, the group was only able to sell 65,000 new pure fiber optic connections.
Höttges said the demand from 1&1 boss Ralph Dommermuth to have access to the 5G networks of competitors while he was building his own network was noted in Bonn “with astonishment”. Such “super roaming” does not exist in any other country in Europe. “We have earned our infrastructure hard,” emphasized the Telekom boss.
>> Read also: Dommermuth’s roaming push enrages competitors
Despite all the adversities, Höttges has set itself a somewhat higher target for the operating profit for the current year. Earnings before interest, taxes, depreciation and amortization including leasing costs (Ebitda AL) adjusted for special effects should rise to around 40.9 billion euros, previously around 40.8 billion euros were expected.
The free cash flow after leasing costs, which is particularly relevant for the dividend, fell in the first quarter by 5.3 percent year-on-year to 3.6 billion euros. However, Telekom still sees itself as “on schedule” for the year as a whole. Telekom shares rose by a good one percent to EUR 21.50 on Thursday morning.
More: 1&1 boss Ralph Dommermuth: “Our expansion partners did not deliver what was agreed”.