Deutsche Telekom claims most successful year ever

Fibre-optic build-out in its home market combined with a customer boom in the US that has delivered record results have added up to a year of what is claimed to be unprecedented success for Deutsche Telekom.

For the year ended 31 December 2019, the global telco reported total revenues of €80.5bn, up 6.4% on an annual basis with adjusted earnings before interest, taxes, depreciation, and amortisation (Ebitda) rising by 7.2% annually to €24.7bn. Net profit rose by 78.5% to €3.9bn.

The company said it had found during the year record revenue and profit growth in all of its operating segments. Looking at the domestic market, the company noted that the focus for Germany in the reporting year was on building out superfast internet connections, and ended the 12-month period with some 28 million households and business locations being able to use super vectoring with bandwidths of at least 250Mbps.

There were 14.4 million fibre optic-based lines in the Telekom network at the end of 2019, 2.2 million more than a year earlier. More than 3.6 million customers use the internet-based MagentaTV service, with 74,000 new customers signing up in the fourth quarter of 2019 alone. Some 4.7 million customers have now opted for the MagentaEINS product package and the share of mobile contract customers with MagentaEINS increased from 51% to 57%.

Mobile service revenues increased by 1.4% in the quarter, and in the Germany operating segment as a whole, revenue rose by 0.9% in 2019 to €21.9bn. Adjusted Ebitda Air Lease (AL) for the full year increased by 2.4% on an annual basis compared with 2018, to €8.7bn.

In the US, the big news during the year may have been approval for T-Mobile US merging with Sprint, but this could not overshadow totally the solid performance of the operating division. T-Mobile US ended the year with 86 million customers, 6.4 million more than a year earlier, and 2019 was the sixth year in succession with more than five million customer additions. The company recorded more than a million net additions to branded post-paid phone customers in the fourth quarter.

The sharp increase in new customers led to T-Mobile US increasing total revenues by 5% on an annual basis to $45.2bn. Adjusted Ebitda AL for 2019 increased by 4.7% compared with the prior year to $12.5bn.

Deutsche Telekom’s other interests in Europe saw revenue and earnings growth accelerate, something that has been happening over the past two years. In organic terms, revenue increased by 1.4% year-on-year in 2019 to €12.2bn. Adjusted Ebitda AL rose by 3.1% to €4bn, driven, said the company, by cost reductions and improved margins.

In the fourth quarter, the organic growth rates stood at 3.8% for revenue and 5.7% for adjusted Ebitda AL. The company also revealed that one of the success factors of the past year was fixed-mobile convergence products with nearly 4.8 million customers now using such offers, 45.3% more than a year earlier. The number of broadband lines grew by 4.2% during the year to 6.7 million, while the number of mobile contract customers increased by 3.4% to 27.6 million.

One thing of note during the quarter was a sharp increase in cash capital expenditure before spectrum. This investment line amounted to €13.1bn in 2019, 7.6% above the prior-year level. Deutsche Telekom attributed the increase to accelerated 5G build-out in the US.

For the 2020 financial year, Deutsche Telekom forecast another increase in revenue with adjusted Ebitda AL expected to grow to around €25.5bn, of which around €13.9bn is projected to come from business outside of the US. As in 2019, growth is expected in all operating segments. The group expects free cash flow of around €8bn.