Deutsche Telekom continues to grow and raises guidance for the 2021 financial year again

Deutsche Telekom has raised the bar for the second time in 2021. Following strong second quarter results, the Group has raised its guidance for adjusted EBITDA AL once again and now expects a figure for the full year of more than 37.2 billion euros.

by Editor-in-Chief

August 12, 2021

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This is 0.2 billion euros more than stated when the guidance was raised in May. The guidance for free cash flow AL remains unchanged at more than 8 billion euros.

In the second quarter, net revenue rose 6.8 percent year-on-year in organic terms – i.e., adjusted for changes in the composition of the Group and exchange rate effects – reaching 26.6 billion euros. Adjusted EBITDA AL amounted to 9.4 billion euros. In organic terms, it rose by 1.1 percent. The development on a reported basis was not as strong on account of the weaker U.S. dollar compared with the prior-year period: Revenue was down by 1.7 percent and adjusted EBITDA AL down by 4.2 percent.

“This was yet another great team success,” said Tim Höttges, CEO of Deutsche Telekom. “Every area of the Group saw an increase in results in the first half of the year, thus continuing the Group’s growth story.”

At 2.8 billion euros, free cash flow AL was up 14.1 percent year-on-year in the second quarter. At the same time, the Group stepped up its investments once again: up 16.8 percent to 4.3 billion euros in terms of cash capex excluding expenses for mobile spectrum.

There was a massive increase in net profit, which was almost 150 percent higher than a year earlier at 1.9 billion euros. Adjusted for special factors, net profit increased by 65.3 percent to 2.1 billion euros in the second quarter.

Germany: Business remains on track

The successful trend in broadband business recorded in the last few quarters continued for Telekom Deutschland between April and June. The company recorded 93,000 net broadband customer additions in this period. There are now 16.6 million fiber-based lines (FTTx, retail, and wholesale) in the Telekom network; an increase of 291,000 in the quarter just ended.

Mobile service revenues were up 2.0 percent against the prior-year period. The negative impact of coronavirus-induced measures on roaming and visitor revenues had been stronger in the prior-year quarter, giving rise to a positive net effect compared with the prior-year period. Adjusted for this effect as well as for regulatory effects, the increase totaled 1.4 percent. Branded contract net adds amounted to 161,000. In this segment, the average monthly data volume used per customer increased by 34 percent year-on-year to 6.3 gigabytes.

Revenue in the Germany operating segment increased to 5.9 billion euros in the second quarter of 2021, up by 0.9 percent against the prior-year period. Adjusted for the change in the composition of the Group and other effects, organic revenue growth stood at 1.8 percent. At the same time, adjusted EBITDA AL grew 3.7 percent to 2.4 billion euros.

United States: Still leading in customer growth

T-Mobile US continues to set the benchmark on the North American mobile communications market. The company once again recorded stronger customer growth than its competitors in the second quarter of 2021. The mobile postpaid customer base grew by 1.3 million, including 627,000 particularly valuable postpaid phone customers. The average monthly revenue for these customers currently stands at 47.61 U.S. dollars and has remained very stable over the last few quarters. At the end of the reporting period, T-Mobile US’ customer base totaled 104.8 million, an increase of almost 6.5 million year-on-year.

Revenue at T-Mobile US increased by 5.4 percent in the second quarter compared with the same quarter of the prior year to 20.1 billion U.S. dollars. Adjusted EBITDA AL decreased by 0.4 percent to 6.9 billion U.S. dollars. Adjusted for the effects from the gradual withdrawal from the terminal equipment lease business model, adjusted EBITDA AL increased by 7.7 percent in organic terms (core adjusted EBITDA).

The integration of Sprint, acquired effective April 1, 2020, is progressing faster than planned. T-Mobile US now expects synergies from the transaction to reach 2.9 to 3.1 billion U.S. dollars in the current financial year. That is 100 million U.S. dollars more than the company’s most recent guidance. Around 80 percent of the voice and data traffic of former Sprint customers is already carried on the T-Mobile network – the fastest network in the United States, according to independent tests.

Europe: 14 straight quarters of growth

Growth in the European national companies accelerated in the second quarter of 2021. Revenue grew by 4.0 percent in organic terms compared with the prior-year period to 2.8 billion euros. Adjusted EBITDA AL increased by 5.3 percent in organic terms to 1.0 billion euros. Thus, the Europe operating segment recorded an organic increase in adjusted EBITDA AL for the 14th consecutive quarter. The slight increase in travel activity together with the associated moderate recovery in roaming revenues had a positive effect in the last quarter compared with the prior-year period.

Customer numbers are rising steadily. Between April and June, the companies in the operating segment recorded 177,000 mobile contract net adds, 58,000 broadband net adds, and 128,000 net additions of fixed-mobile convergence (FMC) product packages. The popularity of these FMC offers can be seen in their growing market penetration: Around 52 percent of broadband households now use FMC products, compared with 48 percent a year earlier.

Group Development: Revenue and profit rise again

The Dutch business proved to be in excellent shape once again. T-Mobile NL added 70,000 mobile contract customers in the second quarter alone. Revenue increased in this period by 2.7 percent in organic terms compared with the same period in 2020 to 506 million euros. The organic increase in adjusted EBITDA AL was even stronger, with growth of 3.6 percent to 155 million euros.

In the cell tower business, revenue grew by 5.1 percent in organic terms to 283 million euros, while adjusted EBITDA AL grew by 8.8 percent year-on-year in the second quarter in organic terms to 170 million euros. The number of sites increased by 1,100 in a year on a like-for-like basis – i.e., adjusted for the sale of the Dutch towers and the inclusion of the Austrian towers – to 39,800.

Systems Solutions: Higher order entry

T-Systems recorded much stronger new business in the second quarter of 2021. Order entry rose by 25.3 percent to 1.1 billion euros compared with the same period in the prior year, driven primarily by a deal in the automotive sector.

Revenue declined 5.5 percent to 1.0 billion euros in the reporting period. At the same time, adjusted EBITDA AL amounted to 72 million euros, one million more than in the second quarter of 2020.