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Deutsche Telekom raises profit forecast for 2018 after strong Q2

Deutsche Telekom has responded to an increase in its second quarter (Q2) earnings by raising its profit forecast for 2018 on Thursday for a second time this year.


Deutsche Telekom now expects to record annual earnings before interest, taxes, depreciation and amortization (Ebitda) of 23.4 billion euros (27.1 million U.S. dollars) compared with its previous estimate of 23.3 billion euros. The German telecommunications giant cited the strong quarterly performance of its U.S. subsidiary T-Mobile, as well as its European home market as reasons for its heightened optimism.


"We remain firmly on track. The trends in Germany and the United States are positive. At our European subsidiaries, we are again posting sustained growth" a statement by chief financial officer (CFO) Thomas Dannenfeldt read.


However, the important contribution made by Deutsche Telekom's U.S. operations to overall earnings was also reflected in a three percent annual decline in gross quarterly revenue to 18.7 billion euros which the company attributed to the dollar's recent weakness against the euro. On a currency-adjusted basis, revenue would have grown slightly in Q2 by 1.3 percent. T-Mobile accounts for nearly half of its parent corporation's gross revenue.


Adjusted Ebidta achieved by Deutsche Telekom came in at 5.9 billion euros (plus 3.9 percent) between April and June. Net profits fell dramatically by 43.5 percent to 495 million euros but were also up by 3.3 percent on an adjusted basis, which excluded currency effects and a 600-million-euro legal settlement with the German government.


Deutsche Telekom emphasized on Thursday that its subsidiary T-Mobile had maintained its top position in the U.S. mobile communications market. Service revenue and customer numbers continued to grow ahead of the division's planned fusion with local competitor Sprint. Under a newly-created T-Mobile-Sprint structure first announced in May, Deutsche Telekom would acquire a 42-percent controlling stake in the merged company, while Japanese Softbank retains a 27-percent stake.


The DAX-listed company wrote on Wednesday that it had successfully defended its leadership in the German telecommunications market in the period as well. Mobile service revenues -- the key benchmark in this business area -- rose 2.9 percent year-on-year to 1.7 billion euros. Revenue grew by 1.3 percent to 2.9 billion euros throughout Europe as a whole during the same period.


Deutsche Telekom further noted that the prospects for its ailing IT division T-Systems had improved again in Q2 after the volume of new orders rose by 42 percent. Newly-installed division head Abdel Al-Saleh has recently unveiled plans to return T-Systems to profitability until 2020 by investing in cloud-computing solutions and eliminating up to 10,500 jobs.


The announcement has been met with resistance from labor representatives who warned that they would challenge the drastic re-structuring measures pursued by Al-Saleh. "We will intensify the conflict after the summer break," said trade union representative and Deutsche Telekom deputy board chairman Lothar Schroeder to the press.


Deutsche Telekom is Europe's largest telecommunications firm and employs more than 217,000 employees across the world. Prior to its privatization in 1995, the Bonn-based company was state-owned and was established as part of the government's postal sector monopoly in 1947.
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