T-Mobile Q4 Profit Rises; Parent Streamlines Structure
T-Mobile USA’s Q4 profit rose 26 percent year-over-year to $483 million, boosting parent company Deutsche Telecom’s mobile unit profits. But Deutsche Telecom swung to a Q4 loss on impairment charge and job cut related expenses. It managed to narrow the net loss to $920 million from $949 million a year ago. DT will combine mobile and fixed-line units to cut costs and grow market share to fend off a global recession.
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Deutsche Telecom tweaked its 2009 guidance higher, citing the sector’s resilience to the financial crisis. It forecast 2009 core profit of $24.7 billion and a free cash flow of about $8.9 billion, at the upper range of the preliminary outlook. “We are in the position that we can cope successfully with the current economic crisis,” said DT CEO Rene Obermann on a conference call Friday. Telecom has so far proven more resilient to economic cycles and downturns than other industries, he said. Meanwhile, fixed-line head Timotheus Hoettges will replace Karl-Gerhard Eick as chief financial officer, he said.
T-Mobile added 621,000 net new customers, down from 951,000 in the year-ago period. The carrier had 32.8 million customers at the end of December, with 7.7 million of those using MyFaves services, a 54 percent jump in a year. Post- paid churn was 2.4 percent last quarter, up from 1.8 percent a year earlier. Obermann praised the 3G rollout in the U.S. and said he expects growth in mobile data services. In the first quarter of 3G offerings, nearly 40 percent of handset sales to contract customers were converged devices and half of these were 3G enabled devices like G1 with Google and the Samsung Behold, said T-Mobile USA CEO Robert Dotson. The company said Q4 service revenue rose to $4.9 billion from $4.37 billion a year ago, primarily due to a 43 percent growth in contract customers and the SunCom Wireless acquisition.
While Deutsche Telecom’s fixed line business continued to decline, the company’s mobile business saw a surge in the quarter, helped by data revenue growth. Data revenue excluding messaging was “growing unabated,” due in part to sales of the iPhone in Europe, and especially Germany, and the G1 in the U.S. and the U.K., the company said. But T- Mobile U.K. and T-Mobile Germany were both hit by “fierce competition.”
The results look decent, said analyst Michael Kovacocy with Daiwa Securities. It’s clear that Deutsche Telekom has the scale to be resilient amid macro-economic pressure, he said, but noted that the company remains heavily reliant on U.S. operations for financial support.