NEWS IN ENGLISH | Deutsche Telekom steps up investment in further growth
Deutsche Telekom steps up investment in further growth
2014-03-07 11:24:00

Building on its successes in the 2013 financial year, Deutsche Telekom plans to invest further in growth. The Group reached its financial targets for 2013, even slightly exceeding the target for free cash flow. Adjusted EBITDA came to EUR 17.4 billion, free cash flow to EUR 4.6 billion.

"The figures for 2013 underscore that Deutsche Telekom is now ideally positioned to become the leading European telecommunications provider," said Tim Höttges, CEO of Deutsche Telekom. In the past year, Deutsche Telekom invested EUR 8.9 billion, not including expenses for mobile spectrum totaling EUR 2.2 billion. That is 10.5 percent more than the previous year. In the current year, the Group will again forge ahead with its investment drive in the fixed network and mobile communications, which was announced back in 2012.

Net profit reached EUR 930 million, after a clear net loss had been reported in the prior year, as a result of significant special factors in 2012, in particular the impairment loss recognized in connection with the business combination of T-Mobile US and MetroPCS. The Supervisory Board and the Board of Management will propose to the shareholders' meeting on May 15 a dividend of EUR 0.50 per share.

Deutsche Telekom is positioning itself as an integrated telecommunications provider, building on its strong standing in access business. In light of rapidly increasing data volumes, a high-quality network is a key competitive factor. With integrated all-IP networks, Deutsche Telekom will become the preferred partner for online service providers, while offering its customers seamless access to its products both on the move and at home.

In the years ahead, Deutsche Telekom will maintain the financial framework that has provided clear and reliable orientation for stakeholders in the past. The ratio of adjusted EBITDA to net debt, for example, is to be within a range of 2 to 2.5.

The guidance for the development of the Group's financial figures are based on the pro forma figures for 2013. Compared with the reported net revenue of EUR 60.1 billion, the pro forma revenue for the 2013 financial year totals EUR 60.9 billion. It is to grow slightly in the 2014 financial year, and at a higher rate in the following year. In the pro forma calculation, adjusted EBITDA for 2013 totals EUR 17.6 billion compared with a reported value of EUR 17.4 billion.

The guidance for free cash flow also reflects the costs for market development and higher investments in property, plant, and equipment in the United States. Three further decisions play a role in Deutsche Telekom lowering its ambition level for free cash flow in 2015, previously set at around EUR 6 billion. One is the sale of T-Mobile US bonds totaling USD 5.6 billion to external investors last year. This step moved the Group's de-risking in terms of U.S. business forward; as a result, however, the Group's interest payments to external investors increased.

As a result of these decisions, free cash flow for 2014 is expected to be around EUR 4.2 billion, compared with a reported value of EUR 4.6 billion in the prior year. "We could achieve our original ambition level for 2015 of around EUR 6 billion if we were to slam the door in the face of the customer rush in the United States. That's not what we want.

Development of the individual Group segments in 2013:

Germany - Outstanding customer acquisition in mobile communications

German mobile business achieved its best result in recent years in the fourth quarter with regard to new contract customers. Deutsche Telekom gained 638,000 mobile contract customers between October and December 2013, keeping market investments at the same level. Alongside customers gained in business with service providers, 280,000 of these additions were attributable to business under the Telekom and Congstar brands. Development in the broadband fixed-network market, however, is still under pressure. At the end of the year, there were around 12.4 million lines, with the market share of existing customers decreasing to 43.0 percent, in particular, due to intense competition. In addition, over the course of the year, around 105,000 customers switched to mobile broadband.

Revenue in the Germany operating segment decreased 1.3 percent year-on-year to EUR 22.4 billion in 2013, reflecting an upward trend compared with 2012. Deutsche Telekom defended its lead in mobile service revenues. Adjusted for the cut in mobile termination rates (MTRs), a slight minus of 0.4 percent was recorded in the fourth quarter compared with the prior year; in unadjusted figures, the decrease was 1.8 percent.

United States - Pace of customer growth increased

The business combination with MetroPCS, the launch of the Un-carrier strategy, an ever growing customer rush - 2013 marked a turning point for T-Mobile US. The encouraging trend in customer development gained strength in the fourth quarter. The total number of customers increased by 1.6 million to 46.7 million. The number of branded postpaid customers rose by 869,000, compared to a decline of 515,000 customers in the final quarter of 2012. T-Mobile US's annual figures were also impressive: In 2013, T-Mobile US recorded more than 2 million new branded postpaid customers after a decline of 2.1 million in the prior year.

Total revenue increased by 34.0 percent year-on-year to EUR 5.1 billion in the fourth quarter. Measured in U.S. dollars, the increase was even more apparent, with an increase of 40.7 percent. In addition to the first-time inclusion of MetroPCS from May 1, 2013, this trend was mainly due to increased revenue from terminal equipment.

Europe - Revenue transformation successfully continued

The financial indicators of the Europe operating segment show encouraging trends, especially in organic terms, i.e., adjusted for changes in the composition of the Group, suchas the sale of Globul and Germanos in Bulgaria, and currency effects. In the fourth quarter of 2013, there was a slight revenue increase compared with the prior-year period of 0.4 percent to EUR 3.5 billion.

In organic terms, adjusted EBITDA grew by 0.4 percent compared with the fourth quarter of 2012 to EUR 1.2 billion. Developments in revenue and EBITDA were largely driven by higher revenue from terminal equipment sales and by the effects of new innovative contractmodels in a number of countries.

Macedonia became the first country in Europe to convert its entire network to the IP standard. This makes Makedonski Telekom the first company in the Group to have a fully Internet Protocol-based network (all-IP).

Systems Solutions - Market Unit remains stable

At T-Systems, revenue generated by the Market Unit - primarily external business with Deutsche Telekom's corporate customers - grew organically by 0.7 percent in the 2013 financial year. The Market Unit's revenue reported for the full year decreased by 1.8 percent year-on-year to EUR 7.7 billion.

The Market Unit recorded a 23.9-percent increase in adjusted EBIT to EUR 83 million in the fourth quarter of 2013 compared with the prior-year period. In the full year, the adjusted EBIT margin rose 1.4 percentage points compared with 2012 to 2.8 percent. Despite this increase, there is still a gap in profitability compared with the industry. Telekom IT - the Group's internal IT business in Germany - is continuing with its mandate of continuously cutting Deutsche Telekom's IT costs.

Source: Telekom