CORRECT: Deutsche Telekom Facing Major Challenge At US Unit
23 Février 2012 - 3:49PM
Dow Jones News
BONN, Germany (Dow Jones)--Deutsche Telekom AG (DTE.XE) U.S.
wireless unit T-Mobile USA showed Thursday it remains the company's
problem child after the division suffered a steep loss in customers
in the fourth quarter.
T-Mobile USA, which contributes roughly 20% of the telecom
giant's operating profit, lost a net 802,000 contract customers in
the three months ended Dec. 31, Deutsche Telekom said in its
earnings release Thursday. It blamed the drop on the fact that the
division doesn't have Apple Inc.'s (AAPL) popular iPhone on
offer.
The decline was "even worse than feared," JP Morgan analyst
Hannes Wittig said in a note to investors. LBBW analyst Stefan
Borscheid anticipates further significant losses in 2012 and next
year, linked to the absence of the iPhone in the unit's
portfolio.
Shares of Deutsche Telekom were trading 2.9% lower at EUR8.71 at
1312 GMT, while the DAX benchmark index was 0.4% lower.
Deutsche Telekom had planned to sell T-Mobile USA to AT&T
Inc. (T), but had to bury the plan in December after opposition
from regulators. The German company wanted to offload the unit as
it wasn't willing to continue making hefty investments in a market
where growth prospects have faded. Observers believe that Deutsche
Telekom may still want to exit the U.S. some point.
The unit's adjusted Ebitda, which measures earnings before
interest, taxes, depreciation, amortization and one-off items, fell
3.1% to $5.33 billion last year, and Deutsche Telekom forecasts a
further decline this year to about $4.8 billion.
T-Mobile USA has seen declining customers numbers over quite
some time. The unit had 24,797 million contract customers at the
end of 2011, compared with 26,447 million a year earlier. It is the
only U.S. carrier not selling the iPhone, making it harder to win
customers that sign up to contracts - a more lucrative sales
formula for mobile operators - and so far also the only one that
isn't building a super-fast fourth-generation mobile network on a
technology called LTE.
This will change soon. Deutsche Telekom said Thursday it will
invest an additional $1.4 billion over the next two years so as to
launch LTE on its U.S. network in 2013 to cater for continued
mobile data growth. The company gave no indication that it would
offer the iPhone anytime soon, and Deutsche Telekom Chief Executive
Rene Obermann said T-Mobile would only be interested "if it makes
economic sense. "
The failure of the U.S. disposal was a major setback for
Deutsche Telekom as it's facing challenges on several fronts.
The Bonn-based company is grappling with intense competition and
tough economic conditions in Europe, where it has a large exposure
to the troubled south-eastern part of the continent through its 40%
stake in Greece's Hellenic Telecommunications Organization SA
(HTO.AT), or OTE.
Deutsche Telekom's net loss in the final quarter of 2011 widened
to EUR1.34 billion, from a loss of EUR514 million a year earlier.
The figure includes several one-time items, including a cash
payment of EUR2.3 billion from AT&T as compensation for the
failed sale of T-Mobile USA, but also impairment writedowns of
EUR2.3 billion and EUR800 million on the U.S. and European
businesses, respectively.
The fourth-quarter impairment losses in the U.S. are linked to
the declining customer contract base, as well as margin pressure at
new contracts, Deutsche Telekom said.
Operating profit for Deutsche Telekom as a whole was EUR18.69
billion in the full year, down from EUR19.47 billion in 2010. The
company forecasts a further drop to around EUR18 billion this year,
saying the overall environment remains challenging.
"The outlook is somewhat disappointing," said Equinet analyst
Adrian Pehl. The company's dividend policy, however, remains one
positive factor, he said.
Deutsche Telekom is proposing a dividend of EUR0.70 a share for
2011, unchanged from a year ago, and the company is sticking to its
commitment to pay out at least EUR0.70 per share for 2012.
-By Philipp Grontzki, Dow Jones Newswires; +49 69 29 725 107;
philipp.grontzki@dowjones.com
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