Deutsche Telekom grows in record year 2018

  • Revenue up by 0.9 percent to 75.7 billion euros; organic growth of 3.1 percent
  • Adjusted EBITDA up by 5.0 percent to 23.3 billion euros, organic growth of 7.2 percent
  • Free cash flow reaches 6.2 billion euros, up 13.7 percent against 2017, organic growth of 18.9 percent
  • Dividend to increase from 65 eurocents to 70 eurocents per share
  • Record investments of 12.2 billion euros worldwide
  • Net profit down against prior year, primarily due to U.S. tax reform
  • Germany business strong in mobile communications
  • Growth at T-Mobile US continues unabated
  • Sustainable growth in Europe
  • 2019 forecast shows undiminished growth momentum

Deutsche Telekom remained on course in the final quarter of 2018. The Group exceeded its financial guidance, which had been raised three times in the course of the year. Revenue increased by 0.9 percent in 2018 to 75.7 billion euros, adjusted EBITDA by 5.0 percent to 23.3 billion euros. At the same time, free cash flow increased by 13.7 percent in the full year to 6.2 billion euros. In organic terms – i.e., assuming constant exchange rates and the same composition of the Group – revenue grew by 3.1 percent, adjusted EBITDA by 7.2 percent, and free cash flow by 18.9 percent.

Deutsche Telekom’s guidance is established on an organic basis. The target values, adjusted most recently in November, stood at around 23.6 billion euros for adjusted EBITDA and around 6.3 billion euros for free cash flow. On an organic basis, the Group clearly exceeded these forecast figures, achieving 23.8 billion euros in adjusted EBITDA and 6.3 billion euros in free cash flow.

“We kept our promises and continued to grow in 2018,” said Tim Höttges, CEO of Deutsche Telekom. “With a strong presence on both sides of the Atlantic combined with our vast investment capacity, our growth profile is unique in the industry.”

The Group’s investments once again increased to a record level. Cash capex before expenses for mobile spectrum reached 12.2 billion euros. This takes the investments made by the Group worldwide in the last four years to more than 46 billion euros, around 21 billion euros of this in Germany. In addition, more than 14 billion euros was spent on mobile spectrum licenses. The success of these massive investments can be seen in all the network tests Deutsche Telekom has won over the last few years, and in particular in the unabated strong customer growth on both sides of the Atlantic.

The decline in adjusted net profit is primarily attributable to the positive one-time effects of the U.S. corporate tax reform in the prior year, which were not matched by any comparable effect in the reporting year. At 4.5 billion euros, adjusted net profit in 2018 was therefore 24.7 percent below the prior-year figure. Reported net profit declined 37.4 percent to 2.2 billion euros. The 2017 figure also included positive special factors from the reversal of impairment losses on U.S. mobile spectrum and proceeds from the disposal of Strato and Scout.

Based on the results achieved, the Board of Management and Supervisory Board will propose to the shareholders’ meeting on March 28 a dividend of 70 eurocents per share. In the prior year, a dividend of 65 eurocents per share had been paid out.

2019 guidance – Deutsche Telekom intends to maintain growth momentum

There are no plans to let up. Deutsche Telekom intends to maintain its current rate of growth in 2019. The guidance follows the medium-term outlook given at the Capital Markets Day 2018, where the Group announced its target average annual increases through 2021: of 1 to 2 percent for revenue, 2 to 4 percent for adjusted EBITDA, and of around 10 percent for free cash flow.

The precise figures are strongly impacted by the application of the IFRS 16 accounting standard, which relates to the reporting of leases and became mandatory as of 2019. In order to ensure comparability, Deutsche Telekom is using adjusted key performance indicators, in line with European competitors: adjusted EBITDA AL (after leases, i.e., excluding lease costs) and free cash flow AL (after leases, i.e., excluding expenditure for leases). As a starting point for the 2019 guidance, Deutsche Telekom is using pro-forma figures AL for 2018, which include the acquisitions in Austria and the Netherlands, as well as the described AL logic, so as to provide better comparability for the full year 2018.

Revenue is also expected to increase again this year. According to Deutsche Telekom’s plans, investments worldwide are set to increase again from the record level of 2018.

TelecomTV note: Full financials are available here.

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