Deutsche Telekom’s first-quarter 2014 results and the subsequent shareholder meeting indicate the company is moving in the right direction, driven by an assertive strategy and performance that keeps shareholders reasonably satisfied.
The company’s objective is ambitious: to become Europe’s leading telecommunications provider and play a central role in advancing the fourth industrial revolution. CEO Tim Höttges outlined a four-step plan to achieve this: build a pan-European network that integrates fixed-line, mobile and Wi‑Fi services; attract and retain as many customers as possible; develop a broad partner ecosystem; and support business customers with data analytics and machine-to-machine (M2M) solutions.
Early technical results from the first quarter show tangible progress toward those goals. Deutsche Telekom reported nearly 500,000 voice-over-IP migrations in Germany and a completed VoIP rollout in Macedonia, while LTE and fiber deployments across Germany continued at full speed.
On the financial side, net revenue reached €14.8 billion for the first quarter of 2014, an 8% increase year-on-year. Adjusted EBITDA decreased from €4.28 billion in Q1 2013 to €4.12 billion in Q1 2014. Net profit rose sharply to €1.8 billion, largely driven by the sale of a 70% stake in Scout24.
“Operationally, as well as financially, we can be satisfied with the first quarter and are on a good path to execute on our full-year targets,” Höttges said during the conference call.
However, the company acknowledged some setbacks. CFO Thomas Dannenfeldt said customer acquisition in certain European growth markets was disappointing, with only 12,000 new mobile contracts in those areas—specifically in the Netherlands, Poland and Romania—where Deutsche Telekom lost momentum. Despite that, mobile performance across the group remained robust: 953,000 smartphones sold in Q1, 551,000 mobile contract net additions, 3.5 million LTE customers in Germany, and a low contract churn rate of 1.1%.
Deutsche Telekom also reported weaknesses within its portfolio. T‑Systems, the company’s business services arm, needs to improve profitability in specific segments. The unit posted significant declines, including a 12.7% year-on-year revenue drop for certain IT services and a 6.7% decline in market unit revenue, largely reflecting ongoing restructuring efforts.
“The decline is in line with projected revenue decline for the full year 2014 as a result of the restructuring and the announced repositioning of T‑Systems,” Dannenfeldt confirmed.
These first-quarter results represent progress toward Deutsche Telekom’s year-end targets: extending LTE reach, expanding mobile broadband and TV services across Europe, and advancing the pan‑European network build. By mid-2014 the company appears to be on target rather than ahead, with clear progress in network deployment and commercial metrics but with work remaining to stabilize growth in specific markets and restore full profitability in its enterprise services division.