Deutsche Telekom Reports Weak 1Q19 Results

Deutsche Telekom Reports Weak 1Q19 Results
May 10, 2019

 

The German telecom giant Deutsche Telekom AG (DTEGY.PK) reported a decline in fiscal 2019 first-quarter net profit, despite posting a year-on-year increase in pre-tax profit on revenue strength. The financial institution declared a better performance in all regions, particularly in the US. The bank also issued almost flat FY19 adjusted EBITDA AL (after leases) outlook and slightly better revenue growth view.  Following the results, the stock ended Thursday’s trading session at $16.70, down $0.04 or 0.24% from the prior close.

Bonn, Germany-based Deutsche Telekom reported 1Q19 revenue of €19.50 billion, an increase of 8.7% from €17.92 billion in the year-ago period. Revenue increased by 3.5% on organic terms.

For the quarter ended March 2019, net profit was €900 million, down 9.3% from €992 million in the similar period last year. In the recent quarter, on a per share basis, earnings fell to €0.19, from €0.21 in the prior-year period.

Adjusted net profit was €1.18 billion euros, almost flat compared to €1.19 billion last year. Adjusted earnings were €0.25 per share unchanged from the previous year. Notably, profit before income taxes grew by €0.1 billion on a y-o-y basis to €1.9 billion.

Commenting on the results, Tim Höttges, CEO of Deutsche Telekom, said: “We got off to a successful start to the year. Deutsche Telekom has much more to offer than just our sensational success in the United States. We are seeing positive trends throughout the Group.”

Segment wise:

  • Consumer revenues were €2.8 billion, up 0.7% on a y-o-y
  • Business revenues were €1.50 billion, an increase of 1.3% from last year.

While mobile revenues grew 1.5% percent, IT revenues increased by 36.9% compared with the year-ago quarter. In contradiction, conventional voice telephony posted a decline in the fixed network as a large number of clients shifted to unlimited plans in relation to the IP migration.

Wholesale revenues recorded €931 million in 1Q19, almost unchanged from €932 million in 1Q18.

Geographically:

  • German revenues inched 0.6% y-o-y to €5.36 billion, led by improved performance in mobile business and an increase in IT and broadband revenues from fixed-network division.
  • In the US, revenue soared 15.9% to €9.80 billion.
  • European revenues were €2.89 billion, up 2.8% percent year-on-year.

Group EBIT was €2.3 billion, an increase of 4% from prior-year. Similarly, EBITDA AL grew 5.6% year-on-year to €5.5 billion. Excluding one-time charges, adjusted EBITDA AL was €5.9 billion, up 8.3% from last year.

The telecom company signed up 455,000 new mobile clients in Q1 2019, of which 132,000 were contract clients under the brands Congstar and Telekom. While broadband connections increased by 47,000, the number of TV clients rose by 66,000 in 1Q19. On the contrary, the traditional fixed network recorded a decrease in the number of lines by 211,000. The company’s activities concentrate on convergent services such as Magenta TV with access to a broad spectrum of extra content, fiber, and TV lines.

At the end of the March quarter, fiber lines constituted 44% of overall lines, a 2.4% rise, fueled mainly by strong demand for the contingent strategy of the firm. Furthermore, wholesale clients are shifting their retail clients to fiber-lines. At the end of the first quarter, the wholesale segment had 12 million lines. Deutsche Telekom’s Q1 performance was mainly led by its American affiliate T-Mobile US, which boosted its sales by 7% to $11.1 billion, representing more than 50% of Deutsche Telekom’s overall Q1 revenue.

T-Mobile US has turned out to be one of the primary development drivers of Deutsche Telekom and has gained over one million new clients each quarter over the past six years. Roughly 1.7 million new clients signed up in the latest quarter. Deutsche Telekom intends to take over its U.S. competitor Sprint for about $26 billion. The proposed merger, however, still awaits US regulators’ approval.

Going forward, for fiscal 2019, the firm continues to anticipate adjusted EBITDA AL of about €23.9 billion relative to last year’s pro forma €23.2bn and revenues to rise moderately from €76.4bn. Excluding the US, adjusted annual EBITDA AL is anticipated to be roughly € 13.4 billion.

The weak results and the unimpressive outlook is expected to keep the stock weak in the short-term.

Technically, the stock has closed below its 50-day moving average. Additionally, the slow stochastic indicator has a reading below 50. As a result, we can expect the stock of Deutsche Telekom to lose value in the short-term.

det - technical analysis - 10th May 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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