Deutsche Telekom Swings to Profit on T-Mobile US Growth

Germany-based telecoms major Deutsche Telekom said it returned to profit in the third quarter on the back of a recovery in the US mobile-phone business that more than offset lower profitability in Europe which was due to intense price competition.

The company said it made a net profit of €588m ($793m, £494m) in the third quarter, compared to a net loss of €7.02bn last year.

Excluding one-time items, net profit fell by 11.4% to €823m, while adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) fell 2.6% to €4.7bn.

Meanwhile, revenue surged 6% to €15.5bn, the fastest pace in four years. By geography, revenues rose 30.5% in the US, while they fell 1.2% in Germany and 6% in Europe.

"After an excellent second quarter, these figures are further proof of our strength," René Obermann, CEO of Deutsche Telekom, said in a statement.

"In the United States, we have managed to achieve an impressive turnaround and in our home market we show ongoing stability, making us the envy of many companies in our industry."

Looking ahead, Deutsche Telekom confirmed its guidance for the full year 2013. The company expects adjusted Ebitda of about €17.5bn.

US Growth

Deutsche Telekom merged with MetroPCS Communications six months ago to form T-Mobile US, the fourth largest mobile carrier in the US.

T-Mobile, which is 74% owned by Deutsche Telekom, reported strong subscriber growth in the third quarter helped by its cheaper service plan and phone upgrade strategy. At the end of the third quarter, the company had 45 million subscribers in the US, up 35.1% from a year ago.

"The Group's growth was driven by the business in the United States. With its successful 'Un-carrier' strategy, T-Mobile US gained more than a million customers net between July and September alone," the company said.

"Together with the inclusion of MetroPCS, this deluge of new customers resulted in a revenue increase, in euros, of more than 30%."

The company now expects to gain 1.6 to 1.8 million new branded contract customers in the US, instead of the previous estimate of 1.0 to 1.2 million.

Difficult European Environment

Meanwhile, the economic environment in Europe remains "strained", according to the company.

Operating profit from the region declined by 13.6% due to higher market investments in the Netherlands and the intensified price war in the Czech Republic and Croatia.

The number of mobile customers fell by 0.5% to 57 million, and fixed-network lines declined 4.6% to 9.6 million.

In the home country, Deutsche Telekom reported adjusted Ebitda of €2.4bn, down 1.1% from last year. The number of mobile customers in Germany rose by 5.4% to 38 million.