Deutsche Telekom has said that a sale of its US business is not likely in the near term, as it trimmed its cash flow forecast and placed emphasis on growth in the market.
Bloomberg said that Timotheus Hottges (pictured), CEO of the company, claimed a US sale is less likely due to the potential regulatory hurdles – a combination with Sprint has been the most recently mooted option, although this is likely to face opposition.
The report continued to note that Telekom is taking a longer-term view of its US business, and plans to argue that if consolidation is not allowed then smaller operators should be able to acquire enough spectrum in forthcoming auctions to compete effectively.
On a group level, Telekom has lowered its aim for free cash flow in 2015, previously set at €6 billion, due to factors including the sale of bonds by T-Mobile US which led to higher interest payments, as part of Telekom’s “de-risking” of the US business; and expenses related to the restructure of its T-Systems arm.
Free cash flow for 2014 is expected to be around €4.2 billion, compared with €4.6 billion in the prior year. For 2015, it is expected to increase “slightly”.
Thomas Dannenfeldt, CFO of the company, said: “We could achieve our original ambition level for 2015 of around EUR 6 billion if we were to slam the door in the face of the customer rush in the United States. That’s not what we want. The market is offering us the opportunity to achieve a different ambition: value-driven customer growth in the United States that translates into an increase in the value of the company.”
The company reported a Q4 net loss of €752 million, compared with a prior-year profit of €641 million, on revenue of €15.67 billion, up 6.5 per cent from €14.71 billion.
Deutsche Telekom noted that one driver of sales was the first-time inclusion of MetroPCS in the number, but that even without this it saw a Q4 revenue increase of 2.8 per cent.
In its home market, its mobile business “achieved its best result in recent years in the fourth quarter with regard to new contract customers”, although mobile service revenue decreased by 1.8 per cent (0.4 per cent adjusted to take into account a cut in termination rates).
The company noted that “development in the broadband fixed-network market, however, is still under pressure”.
Crossing the Atlantic, it said that “2013 marked a turning point for T-Mobile US”, with its total customer base increasing by 4.4 million across the year “excluding the MetroPCS effect”.
Total revenue increased by 34 per cent to €5.1 billion in the first quarter, following the first-time inclusion of MetroPCS and increased revenue from terminal equipment.
However, adjusted EBITDA increased by 21 per cent to €1 billion, which was “disproportionately low” due to increased equipment revenue and higher market investments.
For its other European businesses, Deutsche Telekom claimed “encouraging trends”, with growth areas including mobile data and business customers being the driving factors.
The region saw a “slight” revenue increase of 0.4 per cent to €3.5 billion, with EBITDA up by a similar amount to €1.2 billion.
The company noted higher revenue from terminal equipment sales and the effects of “new innovative contract models” in a number of countries, with cost-cutting measures also taking effect.
For the full year, the company saw a profit of €930 million, compared with a prior-year loss of €5.35 billion, on revenue of €60.13 billion, up 3.4 per cent from €58.17 billion.
The prior-year loss was attributed to “significant special factors” during 2012, in particular an impairment loss recognised in combination with the merger of T-Mobile US and MetroPCS.
Deutsche Telekom said that in the last year it has invested €8.9 billion, not including expenses for mobile spectrum totalling €2.2 billion. In 2014, it will “again forge ahead with its investment drive in the fixed network and mobile communications, which was announced back in 2012”.
And “despite the newly consolidated liabilities from the business combination with MetroPCS”, there was only a “moderate” increase in net debt by €2.2 billion, to €39.1 billion.
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