T-Mobile Owner Hails 'Massive' U.S. Turnaround
By Katrina Bishop
Shares in Deutsche Telekom shot up Thursday after the company grew its customer base in the U.S. -- where it owns T-Mobile -- substantially more than expected.
The German company said it had added 688,000 postpaid customers in the U.S. in the second quarter, helped by a simplification of its tariffs and strong sales of Apple's (AAPL) iPhone. It followed a loss of 557,000 customers over the same period last year.
Shares were 6 percent higher in morning trading in Europe.
The company revealed plans to boost its marketing spend in the U.S. in an attempt to further boost its customer acquisitions. As a result, it cut its forecast for full-year free cash flow from €5 billion ($6.68 billion) to around €4.5 billion.
"We are in the middle of a massive turnaround in the United States and we want to carry on along this successful course," said Rene Obermann, Deutsche Telekom's outgoing CEO, in a statement. "We are prepared to spend more on high-value growth this year than previously planned."
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The company aims to increase the number of branded postpaid customers by another 500,0000-700,000 in the second half of the year, it said. Previously, it had aimed to keep its customer base stable.
T-Mobile looks to close the gap between itself and the other 3 major carriers. John Legere, CEO chats merger with MetroPCS and feels their cellphone plans provide amazing spectrum for consumers.
T Mobile US (TMUS) -- the country's No. 4 mobile service provider -- also reported a boost in smartphone sales, which now account for 86 percent of total units sold -- up from 71 percent in the second quarter of 2012.
Since its launch in April, iPhone sales have made up around 30 percent of T-Mobile's gross customer additions and upgrade sales, it said, adding that sales of Samsung's Galaxy S4 had also performed well.
Telecoms analysts Simon Weeden and Laurie Fitzjohn-Sykes from Citi said they viewed Deutsche Telekom's (DT) results as positive, despite the downgrade to free cash flow.
The increased marketing spend in the U.S. looked large when compared to the expected customer additions, they said, but added, "directionally, the move makes sense in our view."
"The turn-around in commercial momentum in the U.S. came harder and faster than expected and we envisage a positive reaction from the market while investors probe the implications of its higher spending for DT's midterm ambitions," Weeden and Fitzjohn-Sykes said in a research note on Thursday.
In its home market, Deutsche Telekom also added new customers, growing its mobile contract base by 434,000 in the second quarter. Revenue slipped by 0.8 percent €5.6 billion, compared with the same period in the previous year.
Elsewhere in Europe -- where it owns brands including Everything Everywhere in the U.K. and OTE in Greece -- the company said trading remained difficult. The region's economic slowdown and tough competition resulted in a 4.5 percent fall in revenue year-on-year to €3.4 billion.
Overall, the company said earnings before interest, tax, depreciation and amortization, excluding special items fell 6 percent to €4.4 billion, meeting expectations.
It cut its EBITDA expectations for the full year to €17.5 billion from €18.4 billion including MetroPCS for the entire year, as a result of its growth drive in the U.S.
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