Deutsche Telekom earnings beat, seeks to be #1 U.S. carrier

Deutsche Telekom AG (DT) said Wednesday that net profit rose 78% in 2019 as revenue climbed higher, and forecast further growth in the year ahead. Highlights of DT’s earnings report:

Annual revenues increased 6.4 percent to EUR 80.5 billion.
Adjusted net profit rose 8.9 percent to EUR 4.9 billion, and free cash flow was up 15.9 percent to EUR 7.0 billion.
Adjusted EBITDA after leases improved 7.2 percent to EUR 24.7 billion, led by growth at T-Mobile US.
CAPEX, before spectrum investments, was higher than forecast in 2019, at EUR 13.1 billion, a 7.6 percent increase over 2018. The increase was due to the accelerated 5G build-out in the US, the company said. Spending is expected down slightly to EUR 13.0 billion in 2020, with the US stable at EUR 7.8 billion.

DT also grew to 3.3 million fiber homes passed in Europe, completed its FTTC build in Germany and expanded to 28 million premises with super-vectoring at up to 250 Mbps. The all-IP migration was completed in the consumer market in Germany and is expected finished in the B2B segment by end-2020. In the rest of Europe, 91 percent of lines were moved to IP, up 9 percent points over the year.
DT ended the year with 9.6 million Magenta Eins subscribers taking both fixed and mobile services, up by 2 million from 2018. Mobile postpaid subscribers increased by 2.4 million in Europe to 58.0 million at year-end, and the US business grew by a total 6.4 million customers to 86.0 million.

In the fourth quarter of 2019, the company’s growth strengthened, with revenues up 5.4 percent to EUR 21.4 billion and adjusted EBITDA growing 8.2 percent to EUR 6.0 billion. Revenue growth reached 1.0 percent in Germany, 7.7 percent in the US, 3.0 percent in the rest of Europe and 0.2 percent at Systems Solutions. On an organic basis, adjusted EBITDA after leases rose 16.8 percent at Systems Solutions, 4.7 percent in the US, 3.1 percent in Europe and 2.4 percent in Germany.

“The results were strong, particularly in Europe, and reassuring on Germany,” said Citi analyst Georgios Ierodiaconou.

For 2020, the #1 German network operator forecast revenue growth and adjusted EBITDA up around 3% to EUR 25.5 billion, including EUR 13.9 billion outside of the U.S. That guidance does not take into account the impact of the U.S. merger and Deutsche Telekom will revise its outlook once it goes through.

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DT is aiming to become market leader in the United States, CEO Tim Hoettges said on Wednesday, now that a deal for its T-Mobile US unit to take over Sprint is within reach.

“We have the chance to become No.1 in the United States, to overtake AT&T and Verizon. That is our ambition,” Hoettges told reporters in Bonn after Deutsche Telekom reported record annual results in its 25th year as a listed company.

Ebullient, Hoettges brandished a coffee cup bearing a picture of U.S. World War Two character Rosie the Riveter and the slogan ‘We Can Do It’ in front of photographers.

“We’re going to build the best 5G network,” he added (see CNBC video reference below).