Deutsche Telekom ups cash flow guidance on US strength

The German incumbent talked up a strong performance across all of its businesses in the second quarter, and that was indeed the case, but as always its US unit was the one in the driving seat.

The telco said it expects to post free cash flow after leases of around €19 billion for 2024 as a whole, having previously guided for €18.9 billion. The move is noteworthy, but not really a surprise, given that a week ago T-Mobile US increased its own free cash flow AL guidance to US$16.6 billion-$17 billion from its previous range of $16.4 billion-$16.9 billion.

The US mobile operator posted adjusted free cash flow of $4.4 billion in Q2, which it said was a record high and an increase of 54% on the year-earlier quarter. That filtered through at group level, with Deutsche Telekom reporting free cash flow AL of €5.2 billion, up by 48.5% on-year.

The US accounted for almost two thirds of group revenue and an even greater share of earnings in Q2, so a strong performance there always has a big impact on the telco's overall numbers. The operator recorded stronger growth in both metrics in the US than it did in Germany – including a notable 10%-plus increase in EBITDAaL in euro terms – but it is doing well in its home market too.

Revenues in Germany grew by 3.6% to €6.4 billion, while EBITDAaL was up 1% to €2.6 billion, numbers that put the operator at least on a par with its European peers. Its broader European operations, which account for a relatively small slice of the pie, also recorded strong growth in both metrics.

"All our operations are performing well," said Tim Höttges, CEO of Deutsche Telekom. "Quarter by quarter, we are seeing our strategy pay off."

The chief executive kept his comments on the results very brief. Clearly he is keen to let the numbers do the talking.

At group level Deutsche Telekom turned in an adjusted net profit of €2.5 billion, an increase of 31.3% on Q2 last year.

Operational highlights included 113,000 full fibre net adds in Germany, which took its overall base to 1.2 million; that's still pretty small by European incumbent standards, but heading in the right direction.

Its German unit also added 311,000 branded contract customers during the April-June period, a figure that helped drive a 3.7% year-on-year increase in mobile service revenues.

However, the big news in mobile came from the other side of the Atlantic, where T-Mobile US announced a new customer milestone, exceeding 100 million postpaid customers for the first time. It claimed 1.3 million postpaid net adds during the quarter, including 777,000 phone customers, taking its postpaid base to 100.6 million.

"It was another industry-leading quarter for T-Mobile as our continued focus on delivering customers more value and a superior network experience enabled us to outperform our peers in the marketplace and translated into outsized financial growth," said Mike Sievert, CEO of T-Mobile US. There was more: he obviously didn't get the memo on keeping it short.

An extended commentary was unnecessary for Deutsche Telekom on Thursday though. At the time of writing its share price was still ticking upwards and that says it all.