€1.8bn writedown intensifies rumors of T-Mobile UK sell-off
Published: 8 May, 2009
Speculation that Deutsche Telekom will sell off its UK arm mounted further as the German telco announced the expected poor results, including a writedown on the value of T-Mobile UK of €1.8bn.
Writedowns are common in an economic downturn and to some extent are purely a reporting mechanism, but they do throw the spotlight on areas of falling revenues and can undermine confidence. T-Mobile UK has gained a new managing director - Richard Moat, formerly head of Orange Romania - who is now widely expected to have the brief of preparing the company for sale.
Various factors have impacted T-Mobile UK's performance and resulted in the writedown on the unit's value. The cost of attracting new subscribers has risen, said the parent firm, but revenue has not gone up in sync, plus roaming fees have fallen with the reduction in international travel. But in a situation where all cellcos face similar challenges, T-Mobile has lost share to O2, Vodafone and Orange.
Deutsche Telekom reported a €1.124bn ($1.5bn) net loss for its first quarter, reversing a €924m profit last year, on revenue up 6.2% year-on-year to €15.9bn ($21.3bn), and EBITDA up 2.7% to €4.8bn.
However, with the figures adjusted to exclude Greek operator OTE (which was added to the books during Q1), revenue was stable at €15bn and EBITDA declined 4.8% to €4.5bn. The firm raised its EBITDA outlook for 2009 somewhat to take account of OTE - it had previously cut this to predict a 2%-4% decline on last year's €19.5bn, but has now raised it again by €2bn.
In the T-Mobile arm, revenues were up 9% year-on-year to €9.2bn, and mobile subscribers were up 20.6% to 148m, including almost 20m from OTE. The largest unit, Germany, saw mobile customers rise in number by 5% to 39m, while the US base rose by 7.7% to 33.2m. By contrast, the UK saw a 2.6% decline to 16.7m users.
DT chairman René Obermann described the results as "a mixed picture", with the US, UK and Poland particularly affected by the downturn and the intense competitive environment - plus significant exchange rates for Europe.
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