Deutsche Telekom shows you have to spend money to make money

Deutsche Telekom is swimming in cash, as big-time investments over the first six months of 2017 start to pay back in the millions.

Core profit across the quarter grew almost 9% year-on-year to €5.9 billion, while total revenues were upped by 6% to €18.9 billion. The momentum is clearly bolstering some confidence in the ranks as the full-year core profit target has been raised to €22.3 billion.

“Our record investments are paying off: Growing numbers of customers are choosing our networks and products. And revenue and earnings are lifting substantially on the back of this strong customer growth,” said CFO Thomas Dannenfeldt. “That is especially true of our booming US business, but the trend is also positive in Germany and our European companies.”

Perhaps this should be a lesson to some telcos around the world; you can’t make money by being cheap. DT is proving that you have to spend money to make money, as the team has claimed to have invested €3 billion over the course of the last three months, a number which increases to €10.2 billion when you include spectrum auctions, the lions share going to the US here. Over the first six months of 2017, investments have increased by 13.5%.

Looking at the specific markets, DT spent €2 billion on its German network, a year-on-year increase of 17%, which is rapidly increasing the number of FTTP or FTTC customers. Over the course of the last quarter, 622,000 fibre customers were added, taking the total customer base to 8.2 million.

In the wider European market, DT is starting to throw its weight around and is developing a pretty heavy presence across the continent. The team claims, the number of households with access to fixed-network bandwidths of at least 100 Mbps was up by more than one million year-on-year to around 5.3 million, while its LTE footprint now covers 102 million people, an increase of 21 million year-on-year.

Over the other side of the pond, T-Mobile US added more than 1.3 million new customers in the second quarter of 2017, bringing the total number of straight quarters of more than one million customer additions to 17. Service revenues increased by 8.5% year-on-year to $7.3 billion, while total revenue increased by 9.7% to $10.2 billion.

It might sound a bit Del-boy, but in the telco game it rings true. You have to spend money to make money. Investments in the right areas are key; cheapskates will finish last. Unfortunately, such a rule makes it difficult for challengers to catch up, but that is life. DT is spending big, and the force of its bank account is beginning to show for something.