Source Deutsche Telekom
- Adjusted EBITDA of EUR 18.0 billion and free cash flow of EUR 6.2 billion
- Stable dividend proposed of 70 euro cents per share
- Growth in optical fiber and smartphones in Germany
- European business convincing in a peer comparison
- Customer numbers up at T-Mobile USA for the first time since 2009
- Order entry and margin up at T-Systems
- Outlook for 2013 confirmed
- Net debt down EUR 3.3 billion to EUR 36.9 billion
Deutsche Telekom achieved its financial targets in the financial year 2012, and confirmed its dividend planning of 70 euro cents per share. Adjusted EBITDA totaled EUR 18.0 billion, down EUR 0.7 billion or 3.8 percent compared with 2011. At EUR 6.2 billion, free cash flow exceeded the expected level of around EUR 6 billion.
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Subscribers: T-Mobile reported net postpaid subscriber losses of 515,000 postpaid customers in the quarter, which is higher than 492,000 contract customers it lost in the third quarter of 2012 but lower than the 706,000 it lost in the fourth quarter of 2011. The company also had 166,000 net prepaid customer additions in the fourth quarter, fewer than the 365,000 from the third quarter and 220,000 from the year-ago period. T-Mobile also notched 410,000 wholesale subscriber additions in the fourth quarter, which includes MVNO and machine-to-machine figures. T-Mobile said it had MVNO additions of 275,000 during the quarter, an almost five-fold increase from the year-ago period. The 410,000 figure is a significant improvement from the 40,000 wholesale customer losses T-Mobile reported in the fourth quarter of 2011 and also above the 287,000 wholesale additions from the third quarter of 2012.
On this basis, the Board of Management and Supervisory Board will propose an unchanged dividend of 70 euro cents per share to the shareholders’ meeting on May 16. That equates to a dividend payout ratio of 48 percent of free cash flow.
“We are going on the offensive – with extensive investments in networks and in the market,” said René Obermann, CEO of Deutsche Telekom. “In doing so, we retain our general cost discipline as a source of strength. For 2012, we are delivering sound balance sheet figures, we plan to pay a stable dividend, and we have reduced net debt by more than EUR 3 billion to EUR 36.9 billion.”
Unlike many of its European competitors, Deutsche Telekom held its net revenue more or less steady, at EUR 58.2 billion. The organic decline in revenue – i.e., adjusted for exchange rate effects and changes in the composition of the Group – was reduced from from 3.6 percent in 2011 to 2.7 percent. The adjusted EBITDA margin for the full year stood at 30.9 percent, a decline of around 0.9 percentage pointsyear-on-year, largely due to the increase in market investments in the German mobile communications market, especially in the fourth quarter of around 27 percent compared with the fourth quarter of 2011. With success: In these three months alone, sales of smartphones increased to a record high of around 1.5 million, and the number of new contract customers under the Deutsche Telekom and Congstar brands increased by 226,000. Ongoing competitive and price pressure and regulatory decisions also had a negative impact on the reduced EBITDA margin.
Adjusted net profit totaled EUR 2.5 billion, 11.3 percent less than in the prior year. As of year-end, the reported net loss stood at EUR 5.3 billion, EUR 0.8 billion down from the end of the third quarter of 2012. The loss is almost entirely attributable to the impairment loss recognized in the United States in the third quarter of 2012 of EUR 7.4 billion net. As already explained when the figures for the first nine months of 2012 were announced, this non-cash, purely accounting effect is a consequence of the planned business combination of T-Mobile USA and the competitor MetroPCS. The applicable accounting standards require this impairment loss to be recognized.
“This loss of billions is not what it appears to be: We are not lacking in funds to drive forward the development of the Group,” emphasized René Obermann. “As we said in December, we want to massively step up investments in the future again, to almost EUR 30 billion for 2013 to 2015.”
In light of these substantial increases in investments, Deutsche Telekom expects free cash flow of approximately EUR 5 billion for the current financial year, as already announced at its Capital Markets Day in December. In 2013, adjusted EBITDA is expected to amount to around EUR 17.4 billion. Assuming successful completion of the transaction with MetroPCS, the expected adjusted EBITDA would be around EUR 18.4 billion, extrapolated to include MetroPCS for the full year.
Germany – Customer growth continues
In our German business, a number of positive trends continued in 2012. The number of customers with the Internet-based television service Entertain went up by 27 percent year-on-year to 2.0 million. The number of high-speed optical fiber lines increased by as much as 49 percent year-on-year to 0.9 million. Some 300,000 customers opted for fiber optic products in the past financial year. At the same time, line losses in Deutsche Telekom’s traditional fixed network decreased by almost 20 percent compared with the prior year.
In mobile communications, the focus was on attracting and winning back customers, particularly with new rate plans for contract and prepay customers. The mobile contract customer base grew by 1.3 million in the past year. 569,000 of these were new customers of the Deutsche Telekom and Congstar brands, while the rest of the additions were in the fast growing, but much lower revenue reseller segment (service providers).
The number of cell phones sold in the full year increased to 5.6 million. The percentage of smartphones, including primarily Android-based devices and the Apple iPhone, increased by 11 percentage points against 2011 to 73 percent. Around 1.5 million smartphones were sold in the fourth quarter of 2012 alone, making it the strongest sales quarter to date.
Revenue in the Germany segment was 2 percent down year-on-year in 2012, halving the decline compared with 2011. At the same time, adjusted EBITDA declined 4.1 percent to EUR 9.2 billion due to increased market investments, especially in the fourth quarter. Despite these market investments, the adjusted EBITDA margin remained at over 40 percent in the full year.
Mobile service revenues were weaker in the fourth quarter of 2012 than in theprior-year quarter, declining by 2.8 percent. Adjusted for the cut in mobile termination rates, service revenues decreased by 2.2 percent. Mobile Internet revenue rose by almost 20 percent year-on-year to almost EUR 2.0 billion. Accordingly, Deutsche Telekom is also working flat out to roll out its broadband networks as part of its integrated network strategy: Investments in German mobile communications, for example, increased by 16 percent in 2012 compared with the prior year, the number of LTE base stations quadrupled compared with 2011 as of year-end.
Europe – More successful than key competitors
In the Europe operating segment, the decline in revenue slowed substantially in 2012. Despite the persistently strong headwind caused by regulation and despite the difficult economic environment, the decrease in 2012 was 4.7 percent, bringing revenues down to EUR 14.4 billion. Adjusted for exchange rate effects and changes in the composition of the Group, the decrease was 4.0 percent in 2012 compared with 5.5 percent in 2011. Around a half of this is a result of regulatory decisions relating to mobile communications. Looking at the fourth quarter of 2012, Deutsche Telekom’s national companies recorded better revenue trends than seven of their nine local competitors. Adjusted EBITDA for the full year declined by 6.1 percent to EUR 4.9 billion compared with 2011. Adjusted for exchange rate effects, the decrease was 5.3 percent. This results in a margin that is still strong of more than 34 percent.
The most important growth areas remained stable despite the difficult economic conditions. The number of broadband customers increased by 3.9 percent to 4.8 million. At 18 percent, IP TV growth continued apace in almost all markets. The huge success of mobile data business also continued. Adjusted for currency translation effects, the Europe operating segment recorded growth of 16 percent in mobile data revenue in the full year. The number of mobile contract customers grew by more than 900,000. At the same time, smartphones as a proportion of all devices sold rose to 61 percent in the fourth quarter, 10 percentage points more than in the prior year.
The OTE group recorded numerous successes over the past few weeks and months to secure borrowing and reduce its debt, including extending a bank loan of EUR 500 million until February 2014, issuing a 5-year bond with a volume of EUR 700 million, and closing the sale of shares in HellasSat to ArabSat for around EUR 200 million, planned for the second quarter of 2013. Deutsche Telekom expects that the liquidity of the OTE group, in conjunction with projected free cash flow, will cover all repayments in 2013 once these transactions have been concluded.Together with the intended asset disposals, liabilities becoming due in 2014 and beyond are also deemed covered, given no major unforeseeable disruptions.
United States – Prepay drives up total number of customers
For T-Mobile USA, the 2012 financial year was marked by individual positive signs, while the challenges persisted unchanged. The company’s customer base grew by around 200,000 new customers compared with the end of 2011 to 33.4 million. This was the first time since 2009 that the number of customers increased year-on-year, which was due to the high-growth prepay segment, where the number of branded customers rose by more than 1 million. At the same time, monthly revenue in this customer group increased by 11.2 percent year-on-year in the fourth quarter to USD 27.7, which is half the revenue of a contract customer. The number of branded contract customers declined by around 2 million in the full year. The churn rate improved by 0.5 percentage points year-on-year in the fourth quarter to 2.5 percent. T-Mobile USA plans to make further progress in this area, thanks to the agreement with Apple concerning the joint marketing of products in 2013 as well as the extensive network modernization and LTE roll-out. For this reason, in the past year, T-Mobile USA increased its network investments by almost 7 percent; or in a comparison with the prior-year quarter, by as much as 63 percent.
Total revenue declined 4.1 percent in 2012 to USD 19.8 billion. Thanks to positive exchange rate effects, revenues increased by 3.8 percent in euro terms to EUR 15.4 billion. Adjusted EBITDA declined by 7.5 percent to USD 4.9 billion. In euros, it increased slightly over the year by 0.2 percent to EUR 3.8 billion.
T-Mobile USA is enjoying great success with a new rate model that does not include subsidized cell phones: the Value plans. Rather than getting a subsidized device, customers pay for it in installments over a 20-month term. In return, they benefit from extremely attractive rates. Some 30 percent of branded contract customers are currently on Value plans. At the same time, around 61 percent of this customer group uses 3G and 4G smartphones.
Systems Solutions – Strong order entry in the fourth quarter
In the 2012 financial year, T-Systems recorded order entry of EUR 8.7 billion, up some 18 percent year-on-year. This encouraging development was driven by major contracts in the fourth quarter with oil company Shell and the state of Lower Saxony. The extension of the contract with Shell for another five years in particular shows thatT-Systems has further improved its position in the strategically important market for cloud services.
Despite persistent price pressure, external revenue was up 0.6 percent year-on-yearat EUR 6.6 billion. Total revenue also increased by 0.6 percent to EUR 10 billion. This increase is due to strong international revenue, which rose by some 6 percent compared with 2011 to EUR 3.2 billion. The company is successfully counteracting the ongoing price pressure in the industry with cost-cutting and efficiency measures and improved its adjusted EBIT margin steadily over the course of the year to 2.4 percent in the fourth quarter of 2012.
T-Systems once again recorded significant successes in the area of intelligent networks in 2012, such as the major contract from Presbyterian, an operator of hospitals in the United States. In addition to IT services from the cloud, the contract covers the joint development of new e-health applications in the future. In the growth area of the connected car, automotive group Daimler is working with Deutsche Telekom to provide in-car online services. Deutsche Telekom developed the communications infrastructure for the multimedia system Command Online in Mercedes Benz vehicles. This will allow the driver and passengers to use applications via the Internet while in the vehicle, including real-time traffic information, mobility services, personal radio, and access to social networks.
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