Deutsche Telekom to focus on US growth over free cash flow goal
Deutsche Telekom slashed its outlook for 2015 free cash flow as it set out plans to spend more money to win customers in the US.
The German telecoms group said on Thursday it would not reach its target of €6bn of free cash flow in 2015 and said the figure for this year would drop to about €4.2bn from €4.6bn in 2013.
Full-year results for 2013 showed adjusted earnings before interest, tax, depreciation and amortisation of €17.4bn compared with €18bn the year before, down 3 per cent.
Deutsche Telekom shares were down 4.1 per cent at lunchtime on Thursday.
Deutsche Telekom has a 67 per cent stake in T-Mobile US, the fourth-biggest US mobile operator by subscriber numbers. The US business gained a net 2m postpaid customers in 2013, after years of losing subscribers.
T-Mobile US’s strategy has focused on offering some of the cheapest monthly plans and allowing subscribers to upgrade handsets more frequently. The free cash flow figure for 2015 is expected to increase “slightly” on this year’s level, Deutsche Telekom said.
Timotheus Hoettges, Deutsche Telekom’s chief executive officer, said the company was open to consolidation, but had no concern about running the US business on a standalone basis.
The US Department of Justice’s top antitrust official, Bill Baer, has publicly voiced doubts about the benefits of a mooted takeover of T-Mobile by third-biggest operator Sprint, which would cut the number of mobile competitors.
Heike Pauls, an analyst at Commerzbank, said: “The US market is gravitating towards more consolidation but recent regulatory signals have clearly made it look less likely on a 12 month view.”
Thomas Dannenfeldt, Deutsche Telekom’s chief financial officer, said in a statement: “We could achieve our original ambition level for 2015 of around €6bn [free cash flow] if we were to slam the door in the face of the customer rush in the US. That’s not what we want.
“The market is offering us the opportunity to achieve a different ambition: value-driven customer growth in the US that translates into an increase in the value of the company.”
Deutsche Telekom said its dividend policy would remain unchanged, expecting to pay €0.50 a share for the 2014 financial year. It gave no outlook for 2015 dividend payments.
Fourth-quarter adjusted ebitda rose to €4.06bn, from €4bn in the third quarter. It expects 2014 ebitda, excluding special items, to remain stable at around €17.6bn.