Deutsche Telekom, the German telecoms group, declared on Thursday it was able to achieve its financial targets for 2012. However, the company downplayed a year-end net loss of €5.3 billion (US$6.93 billion), which it attributed to an impairment loss of €7.4 billion (US$9.67 billion) in the third quarter over the planned merger of T-Mobile USA and MetroPCS.
Deutsche Telekom said Adjusted EBITDA for 2012 totalled €18 billion (US$23.54 billion), down €0.7 billion (US$0.915 billion), or 3.8 percent compared with 2011 and free cash flow of €6.2 billion (US$8.11 billion), exceeding the expected level of around €6 billion (US$7.84 billion).
Because of the good 2012 financial results, Deutsche Telekom said the Board of Management and Supervisory Board will propose an unchanged dividend of 70 euro cents (US 91 cents), per share to the shareholders' meeting on May 16. That equates to a dividend payout ratio of 48 percent of free cash flow.
"We are going on the offensive - with extensive investments in networks and in the market," said René Obermann, CEO of Deutsche Telekom. "In doing so, we retain our general cost discipline as a source of strength. For 2012, we are delivering sound balance sheet figures, we plan to pay a stable dividend, and we have reduced net debt by more than €3 billion (US$3.92 billion), to €36.9 billion (US$48.26 billion)."
Unlike many of its European competitors, Deutsche Telekom said its net revenue remained steady at €58.2 billion (US$76.13 billion). But the decline in revenue was reduced from 3.6 percent in 2011 to 2.7 percent. The adjusted EBITDA margin for the full year stood at 30.9 percent, a decline of around 0.9 percentage points year-on-year, due to the increase in market investments in the German mobile communications market, especially in the fourth quarter of around 27 percent compared with the fourth quarter of 2011.
The company’s adjusted net profit totalled €2.5 billion (US$3.27 billion), 11.3 percent less than in the prior year. As of year-end, the reported net loss stood at €5.3 billion (US$6.93 billion), €0.8 billion (US$1.04 billion), down from the end of the third quarter of 2012. Deutsche Telekom said the loss is almost entirely attributable to the impairment loss recognized in the United States in the third quarter of 2012 of €7.4 billion (US$9.68 billion) net. It said the non-cash, purely accounting effect is a consequence of the planned business combination of T-Mobile USA and the competitor MetroPCS. The applicable accounting standards require this impairment loss to be recognized.
"This loss of billions is not what it appears to be: We are not lacking in funds to drive forward the development of the Group," emphasized René Obermann. "As we said in December, we want to massively step up investments in the future again, to almost €30 billion (US$39.2 billion), for 2013 to 2015."
Because of substantial increases in investments, Deutsche Telekom said it expects free cash flow of approximately €5 billion (US$6.54 billion) for the current financial year, as already announced at its Capital Markets Day in December. In 2013, adjusted EBITDA is expected to amount to around €17.4 billion (US$22.76 billion). Assuming successful completion of the transaction with MetroPCS, the expected adjusted EBITDA would be around €18.4 billion (US$24.07 billion), extrapolated to include MetroPCS for the full year.
Deutsche Telekom said it now has 1,966,000 TV customers, including IPTV and DTH satellite, representing a growth of 413,000 homes (+26.6%) from 1,553,000 at December 31, 2011. In Germany, the operator offers two distinct TV products, the IPTV service Entertain and the satellite DTH platform EntertainSat. For the rest of Europe, IPTV grew 17.9% with 145,000 homes from 809,00 to 954,000 subscribers.
