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Deutsche Telekom Sales Exceed Estimates on T-Mobile US

In Germany, Deutsche Telekom added 470,000 contract wireless customers. Photographer: Ralph Orlowski/Bloomberg
In Germany, Deutsche Telekom added 470,000 contract wireless customers. Photographer: Ralph Orlowski/Bloomberg

Nov. 7 (Bloomberg) -- Deutsche Telekom AG reported a second consecutive quarter of revenue growth, propelled by a recovery in the U.S. mobile-phone business, while price competition in Europe hurt profitability.

Third-quarter sales rose 6 percent to 15.5 billion euros ($21 billion), the fastest pace in four years and topping the 15.2 billion-euro analyst estimate compiled by Bloomberg. Adjusted earnings before interest, taxes, depreciation and amortization slipped 2.6 percent to 4.66 billion euros. The Bonn-based company cited higher investments in the Netherlands and price wars in eastern Europe.

T-Mobile US Inc., the carrier Deutsche Telekom merged with MetroPCS Communications Inc. six months ago, added customers for a second straight period, bolstered by its cheaper service plan and phone upgrade strategy. As Chief Financial Officer Timotheus Hoettges prepares to fully take over from Chief Executive Officer Rene Obermann, the European operations will take a greater focus, with the German market shaken up by two multi-billion-dollar wireless and cable takeovers within months.

“The company will now likely ramp up investments and marketing spend,” said Adrian Pehl, an analyst at Equinet AG in Frankfurt. “They are on the right track.”

Telefonica, KPN

In Germany, Deutsche Telekom added 470,000 contract wireless customers. Revenue declined 1.2 percent, and adjusted Ebitda slipped 1.1 percent. During the quarter, Telefonica SA and Royal KPN NV agreed to combine their German mobile-phone units, a deal that would cut the country’s four network operators to three.

“We did manage to distance ourselves from the trends that dogged our European rivals during the third quarter,” Obermann said of a conference call. “Deutsche Telekom is growing, something we have been working hard to achieve for a long time.”

Deutsche Telekom’s mobile services revenue in Germany, excluding the effect of reduced termination charges, fell 1 percent in the quarter, Hoettges said. The company estimated that mobile services revenue shrank by 4.7 percent in the wider German market.

Telefonica Deutschland Holding AG, which competes in Germany against Deutsche Telekom with its O2 brand, said today it added 55,000 subscriptions and 110,000 pay-as-you-go customers in the third quarter.

Shares Fall

Vodafone Group Plc, Deutsche Telekom’s biggest rival in Germany, last month completed its acquisition of cable operator Kabel Deutschland Holding AG for about $10 billion.

Deutsche Telekom fell 3 percent to 11.26 euros at 12.34 p.m. in Frankfurt. Before today, the shares had gained 29 percent since the completion of the T-Mobile US transaction in May. That compares with a 17 percent increase by the 24-company Bloomberg Europe Telecommunication Services Index in the same period.

Third-quarter net income was 588 million euros, trailing analysts’ average estimate of 597 million euros.

Deutsche Telekom reiterated its forecasts for full-year adjusted Ebitda of about 17.5 billion euros and so-called free cash flow of about 4.5 billion euros.

T-Mobile US added 648,000 monthly subscribers last quarter, topping a 401,000 average estimate, and forecast it will add as many as 1.8 million subscribers this year.

U.S. ‘Sensational’

While Deutsche Telekom said results in the U.S. were “sensational,” operators in European countries including the Czech Republic and Croatia are competing for customers in an intensifying “price war.” Ebitda in the Czech Republic slumped 27 percent in the quarter, while in Croatia it fell 21 percent. In the Netherlands, where the company increased investment spending, Ebitda declined 19 percent.

Deutsche Telekom is upgrading its landline network to fend off cable providers’ broadband offers. This week, the company suffered a setback when a court struck down its plan to throttle the speed of fixed-line Internet access when customers on flat-rate plans surpass a certain data volume.

T-Mobile U.S. had a third-quarter net loss of $36 million, following a second-quarter net loss of $16 million. The unit’s average phone bill for monthly subscribers shrank about 3 percent to $52.20 from the second quarter as more customers opted for cheaper plans. Analysts had projected $52.86, according to a survey of seven estimates by Bloomberg.

“Be assured we have a Plan B and a Plan C” for the U.S. unit, CFO Hoettges said on a call, adding that the company wouldn’t reveal details of those plans.

To contact the reporter on this story: Richard Weiss in Frankfurt at

To contact the editor responsible for this story: Kenneth Wong at

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