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Deutsche Telekom raises guidance on strong Q3

November 9, 2023

Deutsche Telekom has reported it continues to grow in all key performance indicators, and has raised its guidance for the full year and plans to pay out a higher dividend. In Q3 revenue increased by 0.7 per cent year-on-year in organic terms – i.e., excluding exchange rate fluctuations and changes in the composition of the Group – to €27.6 billion. Service revenues increased by 4.1 per cent in organic terms. At the same time, the Group’s adjusted EBITDA AL grew 6.2 per cent in organic terms to €10.5 billion. The business on both sides of the Atlantic contributed to this. Despite higher capital expenditure in Germany year-on-year, free cash flow AL increased by 61.4 per cent to €4.7 billion in the quarter.“In these uncertain times, Deutsche Telekom continues to grow unabated on both sides of the Atlantic,” said Tim Höttges, CEO of Deutsche Telekom. “We want our shareholders to participate in this positive development by way of a higher dividend.”Deutsche Telekom raised its guidance for the third time this year. For the full year, the Group now expects adjusted EBITDA AL of around €41.1 billion and free cash flow AL of more than €16.1 billion, in each case €0.1 billion more than planned as of the midpoint of 2023. At the start of the year, expectations for adjusted EBITDA AL were still at around €40.8 billion, and for free cash flow AL, at more than 16 billion euros. Adjusted earnings per share are still expected to reach more than €1.60.Reported net profit for Deutsche Telekom increased to €1.9 billion in Q3, up by 21.9 per cent against the prior year. The telco said this reflects both the positive development of earnings from operations and the planned reduction in integration costs incurred in connection with the merger of T-Mobile US and Sprint. Adjusted for these special factors, net profit decreased 5.9 per cent to €2.3 billion in the three-month period. This decline was attributable to positive non-recurring effects in profit/loss from financial activities in the prior year, which did not recur in 2023. Based on this, the Board of Management is proposing to the Supervisory Board to pay out a dividend of €0.77 per share. In the 2022 financial year, a dividend of €0.70 per share had been paid out. The company is also planning share buy-backs for 2024 with a volume of up to €2 billion. This is intended to recoup part of the dilution effect from Deutsche Telekom’s 2021 capital increase. Germany: strong growth in mobile and broadband customer bases
In its home market, Deutsche Telekom recorded a positive trend in its customer numbers and financial figures in the third quarter. The company once again led the market with 96,000 broadband net additions. 6.7 million or 45 per cent of Telekom consumers have now subscribed to a line offering bandwidths of up to 100 Mbit/s or higher. The MagentaTV customer base increased by 51,000 in the quarter to 4.3 million.The new mobile rate plan structure continues to draw in strong numbers. Telekom recorded 350,000 branded contract customer additions between July and September. Telekom remains market leader in mobile service revenues, which were up 2.9 per cent.Deutsche Telekom has increased its earnings in Germany in every quarter for seven years now. In the third quarter of 2023, adjusted EBITDA AL recorded organic growth of 3.1 per cent year-on-year, increasing to €2.6 billion. At the same time, revenue increased by 2.1 per cent in organic terms to €6.3 billion. United States: industry leader in customer additions
Between June and September, T-Mobile US recorded postpaid net additions of 1.2 million. The year-on-year decline is attributable to the deactivation of SIM cards issued to students during the pandemic, which are now no longer required. In the postpaid phone customer segment, net customer additions were on a par with the prior-year level at 850,000. Both figures represent the best in the US mobile industry. Another 557,000 users opted for the fixed-network high-speed internet substitute product in Q3, bringing the customer base for this offering to 4.2 million.The company recorded organic year-on-year growth in service revenues of 4.7 per cent in the quarter to reach $15.9 billion. The key earnings indicator, adjusted core EBITDA, which eliminates effects from the planned withdrawal from the terminal equipment lease business, grew by 12.7 per cent in organic terms to $7.3 billion.Europe: Growth trend continues
The Europe operating segment once again delivered strong financials. In organic terms, adjusted EBITDA AL increased by 3.3 per cent year-on-year in the third quarter to €1.1 billion. Revenue generated by the European national companies increased by 3.7 per cent in organic terms to €3 billion. This growth was primarily driven by organic growth of 5.2 per cent in mobile service revenues.Customer numbers in Europe also saw good growth. Mobile contract net adds totalled 223,000, the number of broadband lines increased by 76,000, and the number of TV customers by 52,000.System Solutions: solid revenue growth
T-Systems saw revenue and earnings growth in Q3. Order entry fell short of expectations, decreasing by 11.9 per cent in organic terms to €742 million, which was partly attributable to phasing effects.Revenue increased organically by 7.1 per cent year-on-year to €960 million between July and September. Adjusted EBITDA AL increased by 1.2 per cent in organic terms to €86 million.

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