Deutsche Telekom sticks to forecasts as profits ebb

Timotheus Hoettges, CEO of German telecommunications company Deutsche Telekom AG, gestures as he speaks at the company's annual news conference in Bonn, Germany, on Thursday. — Reuters

FRANKFURT AM MAIN — Network operator Deutsche Telekom was undeterred Thursday from its optimism for 2019, even as it reported falling profits last year and looked ahead to massive investments in 5G networks and a hoped-for merger with Sprint in the US.

Net profit at the Bonn-based giant fell 37.4 percent to 2.2 billion euros ($2.4 billion), a slump the group said was mainly down to a fatter bottom line in 2017 thanks to tax reforms in the US.

Operating, or underlying profit also dropped 8.9 percent to 21.8 billion euros, although revenues grew 0.9 percent to reach 75.7 billion — in line with forecasts from analysts surveyed by Factset.

"We're swimming against the trend across the telecoms sector" with "excellent numbers," chief executive Tim Hoettges said at a press conference.

Looking to 2019, the group said it would stick to a forecast path set last year of average annual increases in revenue of between one and two percent until 2021, with adjusted operating profit projected to add between two and four percent each year.

Telekom highlighted strong performance at its T-Mobile US division as a powerful growth motor for the firm, as revenue grew 6.8 percent, to $43.1 billion (38 billion euros), while operating profit increased almost twice as fast, rising 13.6 percent to reach $11.9 billion.

The group is still waiting for American competition watchdogs' go-ahead for the US division to merge with competitor Sprint, hoping to complete the tie-up in the first half of this year.

Meanwhile the former public provider — privatised in 1996 — said it plans 13 billion euros of investments in 2019, an "unremarkable" sum for the sector, Hoettges said.

This year, the biggest cash pit will be building out next-generation 5G networks in Germany, with operators set to bid from March on the needed spectrum.

Looming over the process is the question of whether Germany will follow the example of Australia and New Zealand by banning network equipment from Chinese provider Huawei, prompted by fears over its suspected intelligence ties to Beijing.

While Vodafone has said it will remove Huawei technology from its core network in Germany, Telekom said in December it would "reexamine its partnership" with the Shenzhen firm, which has few competitors in the field.

"This situation worries the government, it's a political process, there are voices on both sides," Hoettges said Thursday, while adding that "the important arguments are not only political, but also have a business aspect."

Meanwhile Telekom, Vodafone and Telefonica (O2) are all suing Germany's network regulator over 5G, saying officials have asked operators to invest unreasonable amounts for infrastructure in their bid to eliminate zones without high-speed connectivity.

While Telekom plans to increase its dividend for last year, to 70 euro cents per share compared with 65 paid out for 2017, investors were not immediately enchanted with its results.

In Frankfurt, the shares lost 1.51 percent around 12:05 pm (1105 GMT) to trade at 14.36 euros, against a DAX index of blue-chip shares that was up 0.29 percent. — AFP