Deutsche Telekom Earnings Increase on U.S. Customer Gains

  • Largest German carrier relying on T-Mobile US for growth boost
  • Rivalry with Vodafone, Telefonica weighing on German revenue

Deutsche Telekom AG reported a 13 percent increase in first-quarter earnings after its U.S. mobile-phone unit won subscribers with aggressive promotions, offsetting waning revenue from the German wireless business.

Earnings climbed to 5.16 billion euros ($5.93 billion) stripping out interest, taxes, depreciation, amortization and other items, the company said in a statement Wednesday. Analysts had predicted 5.1 billion euros. Sales rose 4.7 percent to 17.6 billion euros, beating analysts’ projection of 17.5 billion euros.

Deutsche Telekom is benefiting from demand in the U.S., where T-Mobile US Inc. last month raised its forecast for subscriber growth after adding more than 1 million monthly users for the seventh straight quarter. Unit chief John Legere has used social-media marketing and free video-streaming promotions like Binge On to lure subscribers from rivals Verizon Communications Inc., AT&T Inc. and Sprint Corp.

“Deutsche Telekom delivered solid quarterly figures,” Karsten Oblinger, an analyst at DZ Bank, said in an e-mailed note. Mobile trends in Germany were "somewhat weaker,” compared with previous quarters, he said.

Shares of Deutsche Telekom fell 1 percent to 15.03 euros at 9:07 a.m. in Frankfurt. The stock had lost 9 percent this year through Tuesday.

At home, Deutsche Telekom competes with Vodafone Group Plc and Telefonica SA as it seeks to win over customers for MagentaOne -- a package of phone, Internet and television services it offers in Germany and other European countries. Rivals including United Internet AG and Drillisch AG are putting pressure on wireless bills with lower-cost offerings.

Deutsche Telekom added 660,000 fiber-optic lines in Germany, 363,000 of which were for branded customers and 297,000 for its wholesale business. Sales in Germany fell 2.5 percent as mobile service revenue declined.

Europe Pressure

The carrier has started selling its restyled Entertain TV product, which offers new features including access to video platforms and streaming services such as YouTube Inc. and Vivendi SA’s Watchever. The carrier may complement the offering with access to live Bundesliga soccer games, the rights for which are being auctioned. Deutsche Telekom finds the rights "interesting,” Boersen-Zeitung reported May 2, citing managing board member Niek Jan van Damme.

Sales generated by the carrier’s European business, which includes the struggling T-Mobile Netherlands unit, declined 2.4 percent to 3.1 billion euros. The company’s European segment lost 529,000 mobile customers.

Net income surged to 3.1 billion euros, driven by Deutsche Telekom’s sale of its stake in EE Ltd. to BT Group Plc. The German carrier confirmed its outlook for 2016.

Before it's here, it's on the Bloomberg Terminal.