Deutsche Telekom has recently upped its profit forecasts, buoyed by impressive growth figures across its domestic and US markets. The telecom provider reported its latest quarterly numbers, showcasing resilience and agility in a rapidly changing industry. Let’s break down the highlights of this growth story, examining key figures and underlying trends.
During the third quarter of 2024, Deutsche Telekom achieved organic revenue growth of 3.6% year-on-year, translating to total revenues of €28.5 billion. This increase was driven primarily by service revenues, which climbed 3.8% to reach €24.1 billion. Christian Illek, the company’s Chief Financial Officer, characterized this growth as relentless, mentioning, "The growth momentum continues unabated on both sides of the Atlantic,” reflecting the firm’s performance not only within Germany but also across its US operations.
A notable aspect of Deutsche Telekom's finances is its improving leverage ratio, which declined from 2.94 to 2.64 within just one year, reinforcing the company's strong fiscal management. This ratio, comparing net debt including lease liabilities to adjusted EBITDA, is now comfortably below the target level of 2.75, signaling greater financial stability. Free cash flow also surged, rising by 28.3% to €6.2 billion for the first nine months of 2024. Notably, free cash flow alone increased by 32% during the third quarter.
On the back of these strong quarterly results, Moody’s has raised its rating outlook for Deutsche Telekom to positive, and investor sentiment appears buoyant, with shares climbing 3.9% post-announcement to hit €18.77. This uptick means Deutsche Telekom shares have reached their highest level in 23 years, showcasing investor confidence amid positive market feedback.
The growth isn’t confined to the balance sheet; operational metrics offer equally compelling insights. For example, Deutsche Telekom reported its largest increase ever in fibre customers, with 131,000 new customers opting for fibre plans during the third quarter—up from just 77,000 during the same period last year. This surge indicates consumers’ increasing preference for faster internet services. Almost half of Deutsche Telekom’s broadband customers now use plans offering speeds of 100 Mbit/s or higher.
Deutsche Telekom's domestic operations, particularly its mobile services, are also on the ascent. The company gained 327,000 new mobile contract customers between July and September. Mobile service revenues grew by 2.1%, contributing to a total revenue of €6.5 billion for the quarter. The adjusted EBITDA from the German segment climbed 3.5% to €2.7 billion, resulting in a solid EBITDA margin of 42.2%.
Over the pond, T-Mobile US continues to be another engine of growth. The American segment reported significant advances, with 1.6 million new postpaid customers, alongside 865,000 new postpaid phone subscribers. The churn rate for postpaid phone customers reached a remarkable low of 0.86% for the quarter, reflecting growing customer loyalty.
T-Mobile US's revenues reflected this momentum, with service revenues rising 5.2% to $16.7 billion, coupled with adjusted EBITDA growth of 7.8% year on year to €8 billion. This impressive performance affirms T-Mobile US's position as a leading player within the competitive telecommunications industry.
Across Europe, Deutsche Telekom's subsidiaries also exhibited growth. Revenues for the European operations grew by 4.2% to €3.1 billion, with key service revenues modeling healthy increases of 4.7%. More than 27.8 million customers are now subscribed to mobile contract plans across Europe, with fixed-mobile convergence users surpassing 8 million for the first time during this period.
Interestingly, T-Systems, the enterprise division of Deutsche Telekom, recorded substantial growth as well, noting an 18% year-on-year organic increase in order entries. Revenue for T-Systems, related to providing technology and digital solutions, grew by 3.3% to reach €991 million. Adjusted EBITDA for T-Systems surged 17%, reinforcing its important role within the broader corporate structure.
Looking to the future, Deutsche Telekom's updated full-year guidance reflects these strong trends. The company is now projecting adjusted EBITDA AL will hit around €43 billion, up slightly from its previous forecast of €42.9 billion. With this raised guidance, Deutsche Telekom aims to capture the benefits from its solid performance, particularly with T-Mobile US increasing its earnings guidance by $50 million.
To sum up, Deutsche Telekom stands on the threshold of even greater achievements. Armed with strong third-quarter results, expanded customer bases, and elevated market sentiment, the future looks bright for this telecom giant. The telecom sector often faces highs and lows, but Deutsche Telekom appears decidedly positioned for sustained growth. With ambitious goals, innovative services, and market responsiveness, it’s fair to say the company is running for the bright lights of continued success—a future marked by connectedness and service excellence.
