Deutsche Telekom lifts guidance as Sprint merger boosts revenue
Deutsche Telekom today increased its guidance for the full year after the $23bn (£17.6bn) merger between T-Mobile and Sprint boosted second-quarter revenue.
The figures
Deutsche Telekom posted revenue of €27bn (£24.4bn) in the second quarter, up 20 per cent on the same period last year.
Earnings before interest, tax, depreciation and amortization after leases jumped 56.4 per cent to €9.8bn.
Net profit dropped 20.1 per cent to €754m over the quarter.
Why it’s interesting
The figures mark the first set of results since Deutsche Telekom sealed a bumper takeover of US telecoms group Sprint by its American arm T-Mobile in April.
This deal was the driving force behind the German company’s sharp revenue rise.
Excluding the Sprint deal and the impact of exchange rates net revenue grew just 0.1 per cent, according to Hargreaves Lansdown analyst William Ryder.
“The deal makes sense to us as the additional scale and synergies, especially in spectrum, should help the group compete effectively going forward,” he said.
“That said, this may be among the least opportune times to perform a complex tie-up between major telecoms groups.”
Deutsche Telekom said it was upping its forecasts for full-year earnings from €25.5bn to €34bn as a result of the strong results and the impact of the merger.
While the deal has expanded Deutsche’s presence in the US, chief executive Tim Hoettges said the firm was now looking to consolidate in Europe to take on rivals such as Vodafone, O2 owner Telefonica and Orange.
Mark Nelson, analyst at Killik & Co, said the results demonstrated Deutsche’s “relative resilience” to Covid-19, with its fixed networks businesses performing well in Germany and elsewhere in Europe.
“We remain buyers of Deutsche Telekom as a relatively low risk play on data growth in Europe and the US. This, together with reduced capex requirements, should allow it to grow free cash flow by high single-digits over the next three years.”
What Deutsche Telekom said:
“The merger in the United States is a historic step for the group”, said boss Hoettges.
“Our figures are formidable and our strong business operations in Germany and the rest of Europe also play a part in this.”