Deutsche Telekom Gets U.S. Profit Boost Before Sprint Merger

(Bloomberg) -- Deutsche Telekom AG’s quarterly profit met expectations after U.S. unit T-Mobile US Inc. posted another record performance as it closes in on a takeover of smaller rival Sprint Corp.

• The German company’s adjusted earnings before interest, tax, depreciation and amortization after leases grew 7.1% to 6.28 billion euros ($7 billion). The figure, which eliminates accounting changes related to leases, was slightly above the average estimate of 6.24 billion euros in a company-compiled survey of analysts.

Key Insights

• The company’s domestic operation lost 186,000 fixed-line customers in the quarter, with a continued slowdown in fiber subscriber growth.
• The competition is set to intensify after rival Vodafone Group Plc won clearance to buy cable assets from Liberty Global Plc.
• T-Mobile US subscription growth is still accelerating, with 1.8 million net additions in the quarter, as it awaits final approval of the $26.5 billion Sprint takeover, with fewer customers than ever leaving the U.S. carrier.
• T-Mobile’s importance for Deutsche Telekom has grown steadily and accounts for around half of group sales, up from about a third in 2014. After getting approval from the U.S. Department of Justice, T-Mobile now needs to overcome a lawsuit by a group of state attorneys general seeking to block the merger on competition grounds.

Market Context

• Deutsche Telekom shares were flat in early trading. The stock is down 1.3% this year, outperforming a 3.5% fall in the Stoxx Europe 600 Telecommunications index.

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• NOTE: Deutsche Telekom CEO Closes In on U.S. Deal After Third Try

To contact the reporters on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net;Oliver Sachgau in Munich at osachgau@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer

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