T-Mobile owner Deutsche Telekom forecasts slower core earnings growth
Deutsche Telekom has forecast that growth in its core earnings will slow to three per cent this year after a strong end to last year, as the T-Mobile owner looks to complete a merger to create the third largest wireless carrier in the US.
The telecoms firm said it expected adjusted earnings before interest, taxation, depreciation and amortisation after leases (Ebitda Al) to reach €25.5bn (£21.2bn) this year.
The figure is below analysts’ consensus forecast for Europe’s largest mobile operator, and represents a halving of its growth rate in 2019, when Deutsche Telekom’s European and US divisions all performed strongly, boosted by favourable foreign exchange and consolidation effects.
The $26bn (£20bn) deal for Deutsche Telekom’s US unit T-Mobile to take over Sprint last week cleared its last major legal hurdle when a New York judge threw out a challenge brought by over a dozen US states arguing that it would lead to higher prices and poorer service for customers.
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The deal, which was first announced in 2018, had been in regulatory limbo for two years, and Sprint has struggled during the period of uncertainty. T-Mobile chief executive John Legere has indicated he would seek to renegotiate some of its terms to reflect changing market dynamics.
Uncertainty over its outcome of the deal has weighed on Deutsche Telekom’s balance sheet, as have the costs of building 5G networks. In November, the costs forced the mobile operator to say it would cut its 2019 dividend.
Deutsche Telekom reduced its net debt by €2.8bn in the fourth quarter to €76bn, bringing its leverage ratio back down to 2.65 times adjusted Ebitda — within management’s comfort zone.
The company’s fourth quarter revenues climbed 5.4 per cent to €21.4bn, ahead of analyst expectations. Adjusted Ebitda Al rose 8.2 per cent to 6.030, just ahead of consensus expectations.