Deutsche Telekom raises FY financial guidance
November 14, 2024
Deutsche Telekom has reported that it “remained on course for success” in Q3 2024, in line with the plans recently outlined by the company at its Capital Markets Day in mid-October. Revenue increased in the period from July to September by 3.6 per cent year-on-year in organic terms – i.e., excluding exchange rate fluctuations and changes in the composition of the Group – to €28.5 billion. Service revenues grew by 3.8 per cent in organic terms to €24.1 billion.
“The growth momentum continues unabated on both sides of the Atlantic,” commented Christian Illek, CFO of Deutsche Telekom. “At the same time, we have successfully brought our leverage ratio back down to below our target value.”
The ratio of net debt (including lease liabilities) to adjusted EBITDA was 2.64 at the end of September, down from 2.94 one year earlier and back below the target value of 2.75. Stronger free cash flow AL, which grew year-on-year by 28.3 per cent in the first nine months of 2024, contributed to this development. At €6.2 billion, free cash flow AL was up 32 per cent year-on-year in Q3. In October, the rating agency Moody’s raised the long-term rating outlook of Deutsche Telekom to positive. The Deutsche Telekom share has now reached a 23-year high.
Reported net profit came in at €3 billion, up by more than 50 per cent against the prior-year comparative. On an adjusted basis, net profit increased by 3 per cent to €2.3 billion. The difference between these two figures is attributed to net positive special factors from the measurement of several financial investments prompted by a reduction in discount rates following changes in the capital market environment.
In view of the positive development of business both at T-Mobile US and in business outside of the US, the Group has raised its full-year guidance. Deutsche Telekom now expects to report adjusted EBITDA AL of around €43 billion, up slighty from the previous guidance of around €42.9 billion. This relates to T-Mobile US raising the mid-point of its guidance range by $50 million, and to an expected increase in earnings of now €0.1 billion contributed by business outside of the US. The guidance for free cash flow AL remains unchanged at around €19 billion.
Germany: Fibre use continues to grow sharply
Use of fibre is gathering pace. In the third quarter, a record 131,000 customers opted for a fibre plan from Deutsche Telekom. This compares to 77,000 FTTH lines activated in the prior-year period. Broadband net adds totaled 38,000. Some 49 per cent of retail broadband customers now use a rate plan offering speeds of up to 100 MBit/s and more. The number of new TV customers increased significantly to 76,000, up from 51,000 TV net adds in the prior-year period.
Deutsche Telekom posted a strong quarter on its domestic market with 327,000 branded mobile contract net adds. Mobile service revenues grew by 2.1 per cent year-on-year between July and September.
Revenue in the Germany operating segment grew by 2.5 per cent in the quarter to €6.5 billion. Adjusted EBITDA AL rose by 3.5 per cent to €2.7 billion, resulting in a margin of 42.2 per cent.
United States: Further growth
T-Mobile US saw strong growth in key customer metrics in Q3. The postpaid customer base grew by 1.6 million, while the number of postpaid phone customers was up by 865,000. The churn rate in the key postpaid phone customer segment dropped to 0.86 per cent, reaching a record low for a third quarter.
Service revenues increased by 5.2 per cent in the quarter just ended to $16.7 billion. At the same time, adjusted EBITDA AL rose 7.8 per cent year-on-year to €8 billion. With these growth rates, the company is once again leading the industry.
Europe: Growth trajectory continues
Revenue and earnings continued to grow in the national companies in Europe in the third quarter. Adjusted EBITDA AL increased by 8 per cent in organic terms to €1.2 billion. Revenue grew in the same period by 4.2 per cent in organic terms compared with the prior-year period to €3.1 billion. The key service revenues increased by 4.7 per cent.
The mobile contract customer base grew by 176,000 in the third quarter to 27.8 million, while the number of users of fixed-mobile convergence products passed the 8 million mark for the first time on the back of 143,000 FMC net adds in the same three months. The number of broadband customers increased by 47,000, and the number of TV customers by 41,000. Greece was the biggest contributor with 24,000 TV net adds, thanks in part to a strong portfolio of sports broadcasting rights.
Systems Solutions: Sustained uptrend
T-Systems underpinned the solid uptrend of recent times with consistently positive financial performance indicators. In the period July to September, the company recorded an increase in order entry of 18 per cent year-on-year in organic terms to €870 million. Revenue grew in the same period by 3.3 per cent in organic terms to €991 million.
Adjusted EBITDA AL increased by 17 per cent in organic terms to €102 million. T-Systems contributed to the increase in value of the Group with a positive cash contribution of €28 million, up from €18 million in Q3 2023.