Deutsche Telekom revenue increases on the back of T-Mobile US success

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You probably need no reminding of that time in 2011 when Deutsche Telekom tried to sell T-Mobile US to AT&T, or that time last year when Sprint/SoftBank came close to making an official merger bid. But since the beginning of the Uncarrier initiative, T-Mobile has gone from strength to strength. It has increased its subscriber base so much that it’s virtually guaranteed to overtake Sprint as the #3 carrier this quarter, and – over the past few quarters – revenue growth has returned.

And now – it seems – Deutsche Telekom is starting to reap the rewards of its 67% majority stakeholder position in T-Mobile US. During the first quarter of the year, DT’s earnings increased from €4.1B to €4.6B, and this success comes down to two key areas according to the Financial Times.

First, is the weakness of the Euro. Second is T-Mobile US. Our favorite carrier gained an impressive 1.8 million customers in Q1, bringing it up to 56.8 million customers in total. More importantly, from a financial perspective, T-Mobile brought in 41% of the company’s net revenue during the first quarter of 2015. Incidentally, the biggest contribution by any of DT’s companies. Saying that, its German business still made the most profit for Deutsche Telekom.

In the entire report by FT – oddly – the portion that brings the most comfort is the fact that DT now plans to return more money to shareholders. It is more confident in the European telecoms scene after going through a somewhat turbulent and super-competitive spell. At one point it seemed DT would sell of its U.S. arm in order to raise capital to better invest in the European markets. Now, that’s not as huge a motivation as it may once have been.

Timotheus Höttges, chief executive, said: “It has been some time since we have seen positive indications for revenue and earnings in our industry. Our clear strategy with strong investment is paying off.”

It’s further indication also that Deutsche Telekom is also somewhat less inclined to sell off T-Mobile to just anyone. Although it clearly attempted to sell to SoftBank, following a successful period last year, it refused to even entertain the idea of selling to the French carrier, Iliad. It also means it can be picky about strategic partnerships with other businesses, or who it may – or may not – sell its majority share to. Rumors have been rumbling for some time that T-Mobile and Dish might work well as one company, although that’s been almost entirely speculative. So far, there’s been very little substance to that story.

With its momentum in the States, T-Mobile is in a very strong position right now. It’s adding more subscribers than anyone else, and is keeping hold of them better than ever before. Key now will be investment in additional spectrum. Thinking ahead to the vital incentive auction next year, it’ll be interesting to see how exactly T-Mo raises enough cash (or debt) to fund its activities in trying to secure 600MHz spectrum. Will Deutsche Telekom realize the importance of the auction and pony up its own cash? Will T-Mobile start making enough profit to fund the auction independently?

Source: Financial Times

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  • Bordelais

    Maybe Tmo and DT could find enough money to buy 700A from Continuum and expand their low bandwidth coverage strategy.

    • Bordelais

      Low band*

    • Joe

      And Cavalier and AB license co.

      • John Wentworth

        I think that’s what they need the most, a more complete low band network.
        It’s not even about speed, it’s just about matching Verizon and AT&T for in building coverage. When you only have 700mhz on either of them, in most areas speeds aren’t fast any longer. You need AWS or PCS for fast speeds, and their 700mhz networks are pretty crowded. They just need to have a signal in big buildings that’s people’s biggest complaint about T-mo.

        Where I live it only infrequently affects me, I sure do wish they could deploy their 700mhz in my area. Stupid NJ channel 51, which no one watches grr.

    • DStudio

      Snatching up 700MHz spectrum was the smartest thing T-Mobile could have done. It may not be the fastest connection, but while everyone else was greedily eying the 600MHz spectrum that keeps getting pushed further into the future (and dramatically more expensive), they realized that “a bird in the hand” really is better. They may never be able to afford much 600MHz spectrum when the time finally comes; instead they quietly got a bargain today (while everyone else was distracted) and are already deploying it. Excellent timing, I think.

      It’s likely they’ll have 700MHz support in most new phones – as well as reasonably broad coverage – before the 600MHz auction even BEGINS!

      • RiskyBidThis

        The AWS-3 results really do make them look incredibly smart to have bought up and consolidated their 700A holdings when they did.

        The only people out there who could realistically buy 700A now are US Cellular (won’t compete in large metros), CSpire (hasn’t used theirs), AT&T (would run into regulatory problems in many areas), and T-Mobile. The Verizon deal made it possible and possible at a price that was only a bit above the cost of NYC’s J-block alone.

  • KingCobra

    Interesting. Stark contrast to what Sprint is doing to SoftBank.

  • Bordelais

    I read this on reddit a week and a half ago:
    “Continuum 700 transferred each license to individually wholly owned LLC. Prepping fir sale?”

    Perhaps something is in the works.

    • superg05

      it’s more probable someone buying up the spectrum to sell it at a higher price a spectrum troll

  • Jay J. Blanco

    Hopefully DT will invest more cash, t-mobile needs it to help with growth

    • Richard Roma

      DT must be the dumbest company on the planet.

      Lets hope a real carrier like Vodafone buys TMobile US.

  • Fabian Cortez

    Yeah, DT’s really gonna dump T-Mobile now…

  • mingkee

    (designed dialogue)
    Guys in DT:
    US sucks, and we want to get the f’ out ASAP!!!!!

  • RiskyBidThis

    Maybe they’ll return the favor and kick in some cash to help out with the 600MHz auction.

  • BillSmitty

    This should provide another reason for DT to squeeze a bit more $$$ out of Dish when they buy TMO in the near future. Then we can all get over the “sell” rumors of the last 4 years.