There’s nothing quite like the acquisition of a nationwide US mobile operator to put a sheen on the old balance sheet.

Taking at face value Deutsche Telekom’s third-quarter group revenue and adjusted EBITDA AL growth – up 31.9 percent and 49.6 percent year-on-year respectively – you could be forgiven for concluding that management are an elite band of strategic geniuses. Then you remember that actually, it was the welcome addition of Sprint’s numbers. Numbers for which they paid $26 billion, and added €44.1 billion to the net debt pile, bringing it to €124.5 billion in total.

On an organic basis, group revenue for Q1-Q3 2020 was up a more modest 1.1 percent on the first three quarters of 2019 to €73.4 billion. Over the same period, EBITDA AL was up 7.5 percent; still good going, but not quite as eye-catching as the figure quoted above.

As per usual, T-Mobile US was Deutsche Telekom’s growth engine. Third-quarter revenue there was given the aforementioned Sprint treatment, jumping to €16.6 billion from €10 billion a year ago. In Germany, revenue was down 1.1 percent to €5.8 billion, while the rest of Europe was down 1.7 percent to €2.9 billion.

Adjusted EBITDA AL paints a similar picture. The US was up to €6 billion from €2.9 billion; Germany up 1.3 percent to €2.4 billion; and the rest of Europe flat at not quite €1.1 billion.

Last week, T-Mobile US reported separately how well it did in Q3, raising its earnings guidance for the remainder of 2020. Its parent has now followed suit. Deutsche Telekom now expects group adjusted EBITDA AL of at least €35 billion in fiscal 2020, up from its previous forecast of around €34billion. It also raised its full-year free cash flow after losses guidance to at least €6 billion from €5.5 billion.

Customer-wise, as previously reported, T-Mobile US crossed the 100 million mobile users milestone, adding more than 2 million of them in the quarter, including 689,000 postpaid phone customers.

In Germany, Deutsche Telekom’s mobile customer base stood at 47.8 million at the end of September, up from 45.6 million a year earlier. Higher-value postpaid subscribers were up slightly to 25.7 million from 25.1 million. On the fixed side of things, Deutsche Telekom’s broadband base increased to nearly 14 million from 13.7 million. Within that, VDSL/FTTx customers were up to 9.2 million from 8.2 million.

“Deutsche Telekom is showing its strengths,” said CEO Tim Höttges, in a statement. “We are raising our guidance thanks to strong business on both sides of the Atlantic. And we are able to do this despite feeling the effects of the pandemic in some areas.”

Indeed, the area that most keenly felt the effects of the pandemic was Systems Solutions. Deutsche Telekom recorded a €500 million impairment loss on the division, as the coronavirus-induced slowdown hit its traditional IT business. Order intake fell nearly 25 percent to €700 million. Adjusted revenue fell 11.6 percent to €1 billion, and adjusted EBITDA AL fell 16.3 percent to €67 million. With Europe in the grip of a second wave, the prospects for Systems Solutions don’t look all that rosy, which is stark contrast to the rest of the group.



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