* Revenue up by 3.5 percent in organic terms to 19.5 billion euros
* In organic terms, adjusted EBITDA AL is up by 3.9 percent to 5.9 billion euros in the first quarter
* Free cash flow AL up by 9.6 percent in organic terms to 1.6 billion euros
* Capital expenditures up by almost 20 percent year-on-year
* Customer growth in Germany continues
* Momentum in the United States remains unbroken
* European business on course for sustainable growth
* Positive signs at T-Systems
* Group reconfirms full-year guidance
Deutsche Telekom recorded earnings growth in all areas in the first quarter of 2019, thereby seamlessly continuing the Group’s success from its record year of 2018. In organic terms, i.e., adjusted for exchange rate effects and changes in the composition of the Group, net revenue increased by 3.5 percent to 19.5 billion euros.
To provide better comparability with the prior year, Deutsche Telekom is reporting additional, adjusted KPIs as of this quarter. Adjusted EBITDA AL (after leases) and free cash flow AL eliminate the effect of the new accounting standard IFRS 16 on the reporting of leases. This approach is in line with the major European competitors and was explained in detail at the end of February with the presentation of the 2018 figures. It ensures the comparability of key financial figures with the medium-term forecast from the Capital Markets Day 2018.
Adjusted EBITDA AL rose 3.9 percent year-on-year to 5.9 billion euros in organic terms. Free cash flow AL totaled 1.6 billion euros. In organic terms, it increased by 9.6 percent. The increases in the reported figures, i.e., non-organic performance indicators, were even more pronounced, primarily due to the stronger U.S. dollar compared with the prior-year period and acquisitions in Austria and the Netherlands: On this basis, revenue increased by 8.7 percent, adjusted EBITDA AL by 8.3 percent, and free cash flow AL by 18.1 percent.
“We got off to a successful start to the year,” said Tim Höttges, CEO of Deutsche Telekom. “Deutsche Telekom has much more to offer than just our sensational success in the United States. We are seeing positive trends throughout the Group”.
Cash capex excluding expenses for mobile spectrum stood at 3.7 billion euros, up 19.7 percent against the first quarter of 2018. This increase was attributable to the accelerated network build-out in the United States and further extensive investments to build out and modernize the network in Germany. At 1.2 billion euros and down just 0.6 percent, adjusted net profit remained more or less stable year-on-year. Unadjusted net profit declined 9.3 percent to 0.9 billion euros.
The Group reconfirmed its guidance for the current financial year. Deutsche Telekom expects to report adjusted EBITDA AL of around 23.9 billion euros and free cash flow AL of around 6.7 billion euros for the 2019 full year.
Germany – MagentaTV gains ground
In Germany, the positive business trends of the prior year in terms of customer numbers and financial figures continued in the first quarter of 2019. 4.4 million customers now use MagentaEINS, a convergence product package of fixed-network and mobile communications. That is 17.1 percent more than a year ago. 53 percent of branded mobile contract customers now use MagentaEINS packages, an increase of 9 percentage points in a year.
The number of customers with fiber-optic-based products (FTTH, FTTC/vectoring) increased by 688,000 in the quarter, reaching 12.9 million at the end of March, up 24 percent year-on-year. Interest in these products rose tangibly with the launch of MagentaTV, the next development level in Deutsche Telekom’s IP TV offering. 66,000 new MagentaTV customers were recorded in the quarter just ended, taking the total number to 3.4 million, an increase of 7.1 percent compared with March 2018.
Deutsche Telekom retained its leading position on the German mobile market. Service revenues increased again substantially by 2.8 percent compared with the first quarter of 2018. The trend in adjusted EBITDA AL in the Germany operating segment was also very positive in the reporting period, with an increase of 2.4 percent to 2.1 billion euros. Revenue increased 0.6 percent to 5.4 billion euros.
United States – record setting continues
For the last six years now, T-Mobile US has recorded more than one million customer additions in every single quarter. Between January and March 2019, 1.65 million net additions were recorded, including one million branded postpaid customers. Not only is the company constantly winning over new customers, at the same time, customer loyalty is also increasing. Churn fell yet again to a historic low. For branded postpaid customers, it stood at 0.88 percent in the first quarter, down from 1.07 percent in the prior year.
T-Mobile US’ financial performance indicators also reached unprecedented levels in the first quarter. Total revenue increased by 7.0 percent to 11.1 billion U.S. dollars. Adjusted EBITDA AL reached 3.0 billion U.S. dollars, an increase of 6.2 percent year-on-year.
Europe – boom in convergent product bundles
European national companies remain on course for growth in 2019. While revenue increased by 2.8 percent to 2.9 billion euros compared with the first quarter of 2018, adjusted EBITDA AL increased by as much as 5.2 percent to 0.9 billion euros. The first-time consolidation of UPC Austria had a positive effect. In organic terms, revenue increased by 0.4 percent, adjusted EBITDA AL by 1.5 percent.
The business with convergence products bundling fixed-network and mobile communications once again recorded fast growth. Within the space of one year, the number of users of such convergent offers rose 54 percent to 3.8 million. More than 42 percent of broadband households now use convergence products, up more than 10 percentage points within a year. Greece in particular recorded a strong performance.
Systems Solutions – strong development in growth areas
The positive trend in T-Systems’ business from the end of last year continued through the first three months of 2019. At 1.6 billion euros, order entry was up 6.8 percent against the first quarter of 2018, primarily driven by new deals in growth areas such as SAP, public cloud, and health.
Revenue declined 2.1 percent to 1.6 billion euros. There was a general decline in the volume of traditional IT and telecommunications business in Western Europe. T-Systems also terminated contracts in unprofitable business areas. The increase in growth areas was not yet sufficient to fully offset this decline. The results were improved by efficiency enhancements from the ongoing transformation of T-Systems. Adjusted EBITDA AL recovered compared with the prior-year quarter, which had been impacted by start-up costs for new business areas. It increased by 53 percent to 92 million euros.