Deutsche Telekom Boosts Guidance After Beating Estimates

Agatha Cantrill
3 min read
0
In this article:

(Bloomberg) -- Deutsche Telekom AG, Europe’s biggest telecommunications operator, raised its guidance for the third time this year after user growth in Germany helped it post third quarter profit that was higher than analyst estimates.

Most Read from Bloomberg

Adjusted earnings before interest, taxes, depreciation and amortization after leases will be about €41.1 billion ($44 billion), about €100 million higher than its previous forecast, the Bonn-based carrier said in a statement on Thursday. Deutsche Telekom raised its free cash flow after leases forecast by a similar amount to more than €16.1 billion.

Ebitdaal in the quarter was little changed from a year ago at €10.5 billion. That beat analysts’ average €10.3 billion forecast, according to a Bloomberg survey.

The company was boosted by strength in its home market, adding 96,000 net broadband users and 350,000 branded contract mobile customers in Germany in the third quarter. Deutsche Telekom also continued to rely on its US business, which accounts for most of its revenue.

T-Mobile US Inc., which is traded separately in the US, raised its guidance for free cash flow for the year in October. This month, Deutsche Telekom announced plans to spend as much as €2 billion next year to buy back shares and raise its dividend.

Deutsche Telekom’s shares rose 0.6% in Frankfurt trading to €21.47 at 9:14 a.m. The shares have gained 15% this year, compared to a 1.7% gain in the STOXX Europe 600 Telecommunications Index.

Chief Executive Officer Tim Hoettges said the share buyback will repay investors who took a hit to the stock price when the company raised capital to increase its position in the US company two years ago. The German telecommunications giant has been steadily increasing its stake in the US division and now controls most of the shares.

“In these uncertain times, Deutsche Telekom continues to grow unabated on both sides of the Atlantic,” Hoettges said in the statement.

Still, the company is facing mounting competition in the US. Amazon.com Inc. has held discussions with wireless carriers, including T-Mobile US, about wholesale service that would potentially let it offer customers mobile plans for free as part of a Prime membership, people familiar with the matter said in June. Cut-price providers are also gaining strength in Germany. 1&1 AG is set to offer smartphone plans in the country later this year.

What Bloomberg Intelligence Says:

Deutsche Telekom’s better-than-expected 2.2% Ebitda gain outside the US complements a robust US in 3Q, supporting full-year free cash-flow consensus of €16.49 billion vs. at least €16.4 billion currency-adjusted guidance, upgraded again on the US performance. An accelerating profit growth amid healthy operational performance, particularly robust in Germany, also corroborates our view for modest upside to midterm cash-flow expectations.

— Erhan Gurses, BI telecoms analyst

(Updates with share move in sixth paragraph)

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.

Advertisement

Recommended Stories