Deutsche Telekom pushed to loss by €2.2bn BT charge

March 2, 2017

by: Nic Fildes, Telecoms Correspondent

Deutsche Telekom has taken a €2.2bn charge on its investment in BT, pushing the German group to a fourth-quarter loss in 2016.

Europe’s largest telecoms company blamed the Brexit vote, a decline in the value of sterling and the collapse in BT’s share price for the write-off.

It holds a 12 per cent stake in BT which has been rocked by an accounting scandal at its Italian division. BT shares have lost 34 per cent of their value in the past year.

Deutsche Telekom recorded a net loss of €2.1bn in the fourth quarter as a result of the impairment charge compared with a €946m profit in the same quarter in 2015. Full-year net profit was also hit, as it declined 18 per cent to €2.7bn.

The German group nonetheless recorded a solid set of numbers for 2016 with revenue up 5.6 per cent to €73bn and earnings before interest, tax, depreciation and amortisation rising 22 per cent to €22.5bn. Cash flow increased 8.6 per cent to almost €5bn.

Tim Höttges, chief executive, said: “The basis of our strong growth remains the high investment in our networks.”

T-Mobile USA remained a growth driver as the American network added 4.1m customers during the year, boosting revenue by 16 per cent to $37bn and adjusted earnings before interest, tax, depreciation and amortisation by 29 per cent to $9.5bn. “This boom is set to continue,” Deutsche Telekom said.

The company also pledged to return to earnings growth in its home market in 2017 after years of decline.

The struggle by European operators to deliver growth from businesses serving large multinational customers continued as Deutsche Telekom recorded a 21 per cent drop in earnings at its T-Systems division to €530m after writing down the value of a number of legacy contracts.

That, combined with slower growth in European markets outside Germany, weighed down enthusiasm for the results.

Sam McHugh, an analyst with Exane BNP Paribas, said: “All in all 80 per cent of DT’s business (Germany and US) are on the right track, delivering ebitda growth and driving group free cash flow growth forward despite materially higher investments. At the moment, however, the remaining 20 per cent are a drag.”