Earnings: Deutsche Telekom Posts Loss On T-Mobile UK Writedown; Downturn Hits T-Mobile USA
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Deutsche Telekom (NYSE: DT) posted a first quarter loss as the economic downturn hit the performance of its T-Mobile units in the USA, UK, and Poland. But it was T-Mobile UK that hurt the most. The German telecoms giant reported a loss of €1.12 billion euros ($1.5 billion), compared to profit of €924 million euros ($1.23 billion) a year earlier, after writing down €1.8 billion euros ($2.4 billion) on its struggling British operations. DT blamed the UK’s struggles on the territory’s “strong economic slowdown and the intense competition.”
Overall, Deutsche Telekom’s mobile communications unit reported a €635 million euro ($845 million) loss, again hurt by its T-Mobile UK writedown. The British unit wasn’t the only mobile division suffering. T-Mobile USA and DT’s Poland unit were also hit by the economic downturn and negative exchange rates. While T-Mobile USA reported revenue growth of 19.5 percent to €4.1 billion euros ($5.46 billion), measured in US dollars, the growth in revenue was only 4.1 percent. T-Mobile Deutschland revenue, meanwhile, stayed “largely stable in the fiercely competitive domestic market” down half a percent to €1.9 billion euros ($2.53 billion). Deutsche Telekom had over 148 million customers at March 31.
Release | Presentation | Webcast
More earnings highlights including T-Mobile units broken out after the jump.
T-Mobile USA: T-Mobile USA, DT’s former growth engine, is feeling the heat from the US economic downturn, as well as from its larger rivals AT&T (NYSE: T) and Verizon Wireless (NYSE: VZ). The unit posted Q1 net income of $322 million, down from $483 million in the fourth quarter of 2008 and $462 million in the first quarter of 2008. Service revenue was up 4 percent to $4.77 billion. DT said that it was hopeful that T-Mob USA’s 3G network would help spur growth, and that part of its “action plan” for the US was to roll out better 3G handsets, freeze salaries and reduce marketing spend, among other cuts. (Release).
—Net adds down: It also added less net new customers, adding 415,000 in Q1, as opposed to 981,000 in the first quarter a year ago. T-Mobile USA ended the first quarter of 2009 with 33.2 million customers.
—Contract churn down: The rate of defections of valuable contract customers—was also up in Q1 to 2.3 percent, compared to 1.7 percent in the first quarter a year ago.
—Contract ARPU down: Q1 Contract ARPU came in at $52, down from $54 in the fourth quarter of 2008.
T-Mobile UK: T-Mobile UK, one of DT’s biggest units, is clearly suffering. Q1 revenue at the struggling unit plunged 21 percent to 836 million euros ($1.11 billion), down from 1.058 billion euros ($1.4 billion) in the same period a year ago. Total number of customers was down 2.6 percent to 16.675 million. Part of the UK’s “action plan” will include hauling in new management, including Richard Moat, who steps in as managing director. It will also concentrate on non-voice data services—that is mobile broadband—by more aggressive cross-selling and upselling. It’s also embarking on a cost cutting program in which it has implemented a salary freeze, will cut down on marketing costs, and reducing its market invest.
—Customers flee: T-Mobile UK saw 111,000 customers leave. While it added 53,000 valuable contract customers, 163,000 prepay customers left.
—Contract churn up slightly: Contract churn edged up 0.2 percent to 2.4 percent.
—ARPU down: Overall ARPU was down 21 percent to 21 euros ($28), down from 26 euros ($35) a year ago.
Posted In: Money, Earnings, Companies, T-Mobile, Countries, Europe, UK, Germany
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