Thursday, Deutsche Telekom AG (DT) reported a surge in net profit for the third quarter, despite a decline in revenues, helped by strong growth in the Mobile Communications business segment.In addition, the company reaffirmed its guidance for the full year 2008.
In a separate communiqué, T-Mobile USA Inc., the U.S. operation of the company's Mobile Communications Business, reported a decline in third-quarter income, hurt by higher customer acquisition costs, and general and administrative costs.
The Bonn, Germany-headquartered Deutsche Telekom posted net income of EUR 895 million, compared with EUR 256 million in the same quarter of last year. Adjusted net profit rose to EUR 1.18 billion from EUR 1.06 billion in the previous year.
Pre-tax profit for the third quarter increased to EUR 1.6 billion from EUR 1.2 billion last year, while adjusted pre-tax profit was EUR 2.03 billion, up from EUR 1.63 billion in the preceding year.
However, net revenue declined to EUR 15.5 billion, down 1.5% from EUR 15.7 billion in the year-ago period. On an organic basis, net revenue declined by 0.9% year-on-year. The company said that exchange rate fluctuations had a negative impact on third-quarter revenues.
The company's Mobile Communications business recorded strong growth across all geographies. The company said that the T Mobile operations in the UK were negatively impacted by the tough competition, a weak sterling exchange rate and regulatory intervention in the market.
Net profit in the Mobile Communications segment increased to EUR 1.69 billion from EUR 1.36 billion in the previous year. Total revenues rose to EUR 9.03 billion from EUR 8.88 billion in the same period a year ago.
In the Broadband/Fixed Network segment, the company won 344 thousand new DSL customers, of whom 50 thousand were customers returning from competitors. The IP-TV service, Entertain reported a 33% increase in customers, sequentially.
Profit from operations fell to EUR 930 million from EUR 947 million in the previous year. Total revenue declined 5.5% to EUR 5.3 billion from EUR 5.6 billion last year.
The Business customers division posted a loss from operations of EUR 7 million, compared to profit of EUR 26 million in the year-ago period. Revenues decreased by 6.9% to EUR 2.71 billion from EUR 2.92 billion in the preceding year.
Separately, T-Mobile USA, Inc., a wholly owned subsidiary of T-Mobile International, reported third-quarter net income of $442 million, compared with $526 million in the same quarter of 2007. The company noted that the operations were affected by the weak U.S. dollar exchange rate.
However, total revenues increased to $5.51 billion from $4.89 billion in the year-ago period. Service revenues, consisting of contract, pre, prepaid, and roaming and other service revenues rose to $4.91 billion from $4.33 billion last year.
The company attributed the revenue growth to the increase in contract customers, including the acquisition of SunCom Wireless, which contributed $192 million to third quarter revenues.
Blended Average Revenue Per User, or ARPU declined slightly to $52 from $53 in the third quarter of last year. Contract ARPU decreased to $55 from $57 in the previous year, due to lower usage based revenues from contract customers. However, prepaid ARPU rose to $24 from $18 in the year-ago quarter, benefiting from the success of higher ARPU of FlexPay no-contract compared to legacy prepaid products.
During the third quarter, the company added 670 thousand new customers, down from 857 thousand new customers in the previous year.
For the first nine months, Deutsche Telekom's net profit increased to EUR 2.21 billion from EUR 1.32 billion in the comparable period of last year. Adjusted net profit rose to EUR 2.57 billion from EUR 2.19 billion in the year-ago period.
Net revenue for nine months fell 2.5% to EUR 45.56 billion from EUR 46.72 billion in the preceding year.
Looking ahead, for the full year 2008, Deutsche Telekom said it still expects adjusted EBITDA of approximately EUR 19.3 billion and free cash flow of about EUR 6.6 billion.
Further, the company noted that its Board remained committed to its policy of paying an attractive dividend.
Shares of DT closed Wednesday's regular trading session at $14.63, down $0.64 or 4.19%, on a volume of 1.01 million shares.
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