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TIM and DT continue the upbeat theme for European telcos

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Two major European telecoms operators gave industry watchers cause for optimism with their quarterly results announcements this week, reflecting a broader trend across the continent.

Markets reacted positively to TIM’s third-quarter figures on Thursday, despite the fact that the Italian incumbent is still struggling in its domestic market; essentially, its operational figures show signs of improvement at home while its Brazilian business is driving topline growth. Meanwhile, further north Deutsche Telekom made headlines by raising its full-year guidance again on the back of strong revenue growth.

Although it failed to mirror TIM’s share price hike, the German operator’s numbers are significantly more solid. Net revenue for the three months to the end of September grew by 8.8 percent to €28.98 billion, while adjusted EBITDA aL was up 8.5 percent to €10.48 billion.

“Our businesses continue to grow. That puts us in a position to raise not only our guidance – for the third time this year – but also our dividend,” said chief executive Tim Höttges.

As is often the way, that guidance hike is a question of semantics: the telco is now looking at full-year adjusted EBITDAaL of more than €37 billion, as opposed to its previous target of around €37 billion. However, its adjusted EPS figure is more clear cut; adjusted earnings per share are now expected to come in at more than €1.50, as opposed to over €1.25. And, subject to approval, the telco plans to pay out €0.70 per share this year, up from a €0.64 per share dividend in 2021.

T-Mobile US, as always, had a big impact on Deutsche Telekom’s group numbers, but its German business is also performing well, with revenue and earnings up by 2.8 percent and 3 percent respectively.

The incumbent is not the only telco performing well in Germany though. Telefonica, which posted Q3 numbers late last week, reported 6 percent revenue growth in Germany, while its topline in Spain was only a whisker above flat. Nonetheless, growth of 0.2 percent in the domestic market, where all players have been hit by a fierce competitive landscape in recent quarters, is still indicative of a positive trend.

And while the same cannot quite be said for TIM, which reported a 5.3 percent decline in domestic revenues in the same quarter, there are green shoots. The telco’s mobile churn rate fell to 3.1 percent in the third quarter, its lowest level in 16 years, while fixed churn also improved.  TIM added 88,000 mobile customers to take its total base to 30.5 million and heralded an ongoing stabilisation trend in mobile number portability, despite ongoing competition at the low end of the market.

For a company whose future is still mired in uncertainty – the proposed sale and merger of its fixed network with that of Open Fiber being very much up in the air – any positive signs in Italy are great news.

At group level though, the telco’s growth is still being driven by its operations in Brazil, where revenues were up by almost 25 percent during the quarter.

That too is a pattern we have seen elsewhere in Europe.

Orange, which reported earlier this month, derived the bulk of its topline growth from its African and Middle East operations, with France declining by 1 percent year-on-year and Spain showing 0.2 percent growth, matching Telefonica’s result.

As an aside, in the UK, BT does not have the luxury of an overseas consumer arm to prop up its domestic figures, but its consumer division brought in revenue growth of 2.5 percent in its fiscal second quarter to the end of September.

While Europe’s big guns have long leaned on international businesses in fast-growing markets to add a bit of gloss to their quarterly figures, we’re starting to see those domestic markets perking up a bit. Long may it continue.

 

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