Deutsche Telekom’s solid Q1 results are a boon given aggressive roadmap

Deutsche Telekom’s first quarter 2014 results and subsequent shareholder meeting have shown that the company is on the right footing, with an aggressive strategy and results to keep the shareholders relatively happy.

The goal is an ambitious one: to become Europe’s leading telecommunications provider which will ‘drive the fourth industrial revolution’. According to CEO Tim Hottges, this will be done in four steps: building a pan-European network which brings together fixed line, mobile and Wi-Fi; get buy in from as many customers as possible; build up a partner system; and helping out business customers with data analysis and M2M requirements.

Taking this into account, the technical achievements of the German telco in the first quarter show plans moving forward. DT announced the rollout of voice IP technology had nearly 500,000 migrations in Germany, and complete rollout in Macedonia, whilst LTE and fibre roll out in Germany was going “at full speed.”

As for financial results, net revenue stood at €14.8bn for 2014, an 8% increase year on year, although adjusted EBITDA took a hit from €4.28bn in 2013 to €4.12bn for Q114. Net profit leapt to €1.8bn, a figure attributed to the 70% stake sale of Scout24.

“Operationally, as well as financially, we can be satisfied with the first quarter and are on a good path to execute on our full year targets,” Hottges said in a conference call.

There were missteps; chief financial officer Thomas Dannenfeldt noted that the company was “not satisfying” its shareholders to the tune of only 12,000 new mobile contracts in its European growth areas, citing the Netherlands, Poland and Romania as countries where DT lost momentum. Nevertheless, the German telco’s overall outlook in mobile was strong; 953,000 sales of smartphones in quarter one, 551,000 mobile contract net adds, 3.5m LTE customers in Germany and a class contract churn of only 1.1%.

Despite this, however, Deutsche Telekom notes a weakness in its portfolio. The company admitted T-Systems needed to become more profitable in certain areas. Plenty of negative numbers were posted, including a 12.7% year on year revenue decrease for Tel IT and a 6.7% hit for market unit revenue, but this was predominantly down to restructuring.

“The decline is in line with projected revenue decline for the full year 2014 as a result of the restructuring and the announced repositioning of T-Systems,” Dannenfeldt confirmed.

These figures are just a step towards the targets Deutsche Telekom has for the end of 2014 – LTE rollout of 250m users in the US and continued growth in mobile broadband and TV in Europe, alongside the development of the pan-European network. For now, the company is on target, rather than ahead of it.

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