Deutsche Telekom AG — Earnings Release 2005

Nov 9, 2005

News Details

Ad-hoc | 9 November 2005 06:35

Deutsche Telekom invests in basis for future growth of the Group (part 2)

Ad hoc announcement transmitted by DGAP. The issuer is solely responsible for the content of this announcement. —————————————————————————— Part 2 of the explanatory remarks regarding Deutsche Telekom’s ad hoc notification Deutsche Telekom AG Friedrich Ebert Allee 140 53113 Bonn Deutschland ISIN: DE0005557508 (DAX) WKN: 555750 Listed: Amtlicher Markt in Berlin-Bremen, Düsseldorf, Frankfurt (Prime Standard), Hamburg, Hannover, München und Stuttgart; EUREX; London; Amsterdam; NASDAQ Europe; New York (ADR); Tokio End of ad hoc announcement (c)DGAP 09.11.2005 Issuer’s information/explanatory remarks concerning this ad hoc announcement: The Group will therefore focus on intensifying activities for marketing new products and services, and will also improve its position vis-à-vis the competition as a result of the announced staff reduction measures. Some examples of the company’s intensified market approach are its plans to win 1 million triple-play customers by 2007, sell 0.5 million dual phones over the next two years, and exceed the 1 million mark with web’n’walk wireless devices by 2007. At the same time, broadband busi- ness is to be further expanded There are plans to increase the number of DSL lines to 11.5 million by 2007 – from 7.3 million at present. Around 8.2 million net additions to the contract customer base are also expected in the mobile communications business by 2007. The customer base will then be considerably more than 90 million worldwide. In the Business Customers area, IT revenue with small and medium-sized enterprises is set to increase to more than EUR 1 billion. To meet these targets, and thus achieve a broader base for profitable growth, sales and revenue growth is taking priority over boosting the operating performance in the coming year. In the first three quarters of 2005, the Group again increased revenue and profits. While Group revenue increased by 3.6 percent to EUR 44.2 billion year-on-year, adjusted EBITDA increased by 5.0 percent to EUR 15.6 billion. The Mobile Communications business area made a major contribution to increasing the profitability of the Group, recording an increase in adjusted EBITDA of 16 percent compared with the prior-year period. Profit before income taxes in the first nine months of 2005 was around EUR 6.6 billion, which represents year-on-year growth of around EUR 5.5 billion. This increase is mainly attributable to improved profit from operations. Reported net profit increased to approximately EUR 4.4 billion. In the same period of the prior year, the Group reported a net loss of around EUR 0.2 billion. The underlying factor in this gain was the positive development in profit before income taxes, which, in addition to substantially improving profit from operations, was affected to a considerable extent by special factors. The positive effect was created predominantly by the non-recurrence of factors that had a negative impact on profits in the prior year: In addition to impairment losses on the FCC mobile communications licenses of T-Mobile USA in the amount of approximately EUR 1.4 billion, goodwill impairments totaling about EUR 2.4 billion for T-Mobile UK und Slovak Telecom were recognized last year. In contrast, positive special factors, in particular as a result of the sale of remaining shares in MTS, had a substantial impact in 2005. Adjusted net profit was around EUR 3.4 billion. Year-on-year, this represents an improvement of EUR 0.3 billion or approximately 11 percent in the first nine months, and an increase of 27 percent to just under EUR 1.5 billion in the third quarter. The growth in net revenue of the Group was driven by the positive develop- ment of the Mobile Communications business area in particular. The year-on-year increase in revenues by 8.9 percent to EUR 21.6 billion in the first nine month, and by 10.6 percent to EUR 7.6 billion in the third quarter of 2005, are primarily due – in addition to the deconsoli- dation of the Slovak mobile communications investment – to customer growth at T-Mobile USA. Revenue in the Business Customers business area remained at approximately the same level as last year, both in the nine-month and in the quarterly comparison, at just under EUR 9.5 billion and EUR 3.1 billion respectively. Revenue gains in the Enterprise Services business unit, in which positive developments in the Computing & Desktop Services area were a primary factor, were offset by a decline in revenues in the Business Services unit. Total revenue in the Broadband/Fixed Network business area decreased by 3.8 percent and amounted to EUR 19.6 billion; in a year-on-year comparison of the third quarters, the revenue decline was smaller, falling 2.3 percent to just under EUR 6.5 billion. Within this total, revenue growth at T-Online was more than offset by a decrease in revenue at T-Com. T-Online achieved clear revenue gains, especially by continued expansion in the broadband market. Whereas T-Com’s revenue decreased year-on-year by 4.9 percent in the first half of 2005, the drop in the third quarter was only 2 percent compared with the same period last year. The key factor behind the slower decline was the positive development of broadband lines and the data communication and wholesale areas. This development was unable to offset the drop in revenue caused by declining narrowband lines and reduced call prices. The increase in adjusted EBITDA in the Group of EUR 0.7 billion or 5 percent to EUR 15.6 billion in the first nine months of 2005 was primarily due to favorable developments in the Mobile Communications business area, and was mainly the result of revenue gains due to customer growth. This continues to reflect the success of the “Save for Growth Program,” an integral part of the Group-wide Excellence Program. Adjusted EBITDA in the third quarter of 2005 improved over the prior-year period by EUR 0.2 billion to EUR 5.5 billion. EBITDA reductions in the business areas of Broadband/Fixed Network (minus 2.8 percent) and Business Customers (minus 1.5 percent) and at Group Headquarters & Shared Services were more than offset by a 15-percent increase in EBITDA in the Mobile Communications business area. End of part 2 of the explanatory remarks regarding Deutsche Telekom’s ad hoc notification, follows part 3 End of message (c)DGAP