Deutsche Telekom lifts guidance again on Europe strength

Deutsche Telekom has once again raised its full-year earnings guidance, a further sign of improving trends for European telecoms operators.

The move comes after the group’s T-Mobile US unit increased its own guidance across a range of metrics last month. But while that doubtless informed Deutsche Telekom’s decision to do the same – T-Mobile US accounts for nearly two-thirds of turnover and earnings, after all – the telco also made it clear that its European businesses played a part too.

“With T-Mobile US already having raised its guidance in the United States, the group is now also raising its guidance for adjusted EBITDA AL. This adjustment reflects high expectations for the business in Germany and Europe,” it said in its second-quarter results announcement.

As such, Deutsche Telekom expects to post earnings for full-year 2023 of around €41 billion, having previously guided for €40.9 billion. That figure was itself an upgrade on the telco’s initial predictions; it upped EBITDA AL from €40.8 billion in Q1. That first hike was driven by the US market, but that comment about high expectations on this side of the Atlantic shows that it’s not that simple this time around.

At group level reported adjusted EBITDA AL grew by 1.5% to €10 billion, or a 3.8% increase on an organic basis. €6.6 billion of the sum was generated in the US, an increase of 3.4%, or 5.8% in dollar terms, while growth in Germany was a creditable 4.1% to €2.5 billion.

Service revenue grew by 3.2% organically, or 1.4% on a reported basis, to €23 billion. Net revenue slid by 2.4% to €27.2 billion, mainly due to the planned withdrawal from the terminal equipment business in the US, Deutsche Telekom said. Indeed, in Germany revenue grew by 1.9% to €6.2 billion and the telco’s other European businesses reported 6.2% topline growth.

The German incumbent’s chief executive was naturally upbeat, talking up a continuation of a positive trend.

“Our businesses are developing well, despite complex market environments,” Tim Höttges said. “This is underscored by our organic growth rates for service revenues, earnings, and free cash flow.”

Strong customer growth in its home market was a particular highlight for Deutsche Telekom. Or as the telco itself put it, “customer growth continued unabated in all areas.”

Broadband revenues were a key driver of growth in Q2, the operator said. It added 67,000 broadband customers during the quarter, while FTTx customers grew by 248,000 to 12.5 million. Of those, just 833,000 customers were connected via FTTH, which is not a huge percentage but represents year-on-year growth of 38%.

Mobile customers grew by 1.6 million in the quarter to 57.7 million, including the addition of 354,00 contract customers and branded net additions of 319,000; the last figure was more than double that recorded in the year-earlier quarter.

Deutsche Telekom noted that churn for contract customers remained low at 0.8%, although it did not provide a comparative figure.

“Customer satisfaction pays off,” Deutsche Telekom said, with regard to its domestic performance.

Who’d have thought it?

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