DT praises Europe, slams regulator over spectrum proposals

Deutsche Telekom hailed a positive start to the year with what it described as record quarterly profit growth in its Europe segment, prompting CEO Timotheus Höttges to thank the European national companies for "a remarkable result" in the first quarter (Q1) of 2024.

In Europe, Q1 revenue increased by 6.3% on a reported basis year-over-year to just shy of €3 billion (US$3.26 billion), while adjusted earnings before interest, tax, depreciation and amortization after leases (EBITDAaL) increased 8.7% to just over €1 billion ($1.1 billion). The positive performance was attributed to an increase in customer numbers as well as price rises.

"Europe is leading the pack right now. The numbers in terms of growth and earnings look very good," said Höttges, speaking via an interpreter during a presentation to the media. "Our European subsidiaries have posted earnings growth for 25 consecutive quarters, which goes to show just how important and positive our Europe segment is for the group as a whole," he said.

DT's Europe segment excluding Germany covers Austria, Croatia, Czech Republic, Greece, Hungary, Romania, Poland and Slovakia. The segment also includes national companies (NatCos) in North Macedonia, Montenegro and the GTS Central Europe group in Romania, as well as the Europe headquarters.

Höttges particularly highlighted the region's strong increase in net mobile customer additions at 184,000, compared to 104,000 a year previously. "This is genuinely a remarkable result for our European business," he said.

In Germany alone, revenue increased by 2.6% to €6.3 billion ($6.84 billion), while adjusted EBITDAaL increased by 3.5% to €2.6 billion ($2.8 billion).

Overall, total DT group net revenue in Q1 2024 increased by 1.6% on an organic and 0.4% on a reported basis to €27.9 billion ($30.3 billion), and adjusted EBITDAaL rose 5.8% to €10.5 billion ($11.4 billion). The net profit was much lower at €2 billion ($2.17 billion) compared to €15.3 billion ($16.6 billion) a year previously, and this was explained by the gain from the sale of GD Towers that was recognized in the prior year.

Germany: Opportunities, challenges, and ongoing irritations over 1&1

Höttges gave a generally positive assessment of the performance of its units in Germany as well as the US. In DT's domestic market, he said ongoing investments in 5G, fiber and digital services "are paying off," although he conceded that challenges lie ahead in maintaining the pace of construction. He also noted that while broadband net adds slowed down in the quarter, the pace increased for television and fiber-to-the-home (FTTH) net adds. 

On the topic of FTTH and TV, Höttges also pointed to regulatory changes that are set to benefit German NatCo Telekom Deutschland, but adversely affect rivals such as Vodafone Germany.

German housing associations are prohibited from bundling TV services and broadband into leases for millions of multi-dwelling units (MDU) from July 1, 2024, opening the way for DT and others to prise individual users away from bulk deals previously offered by cablecos. Vodafone has already admitted that it expects to retain just 50% of its 8.5 million MDU households following the change in the law. 

Meanwhile, Höttges also took the opportunity to take a swipe at German regulator Bundesnetzagentur (BNetzA) over what it will expect from the three established mobile network operators in Germany in return for the extension of certain spectrum usage rights by five years from 2025.

BNetzA this week opened a consultation on its new proposal to extend spectrum allocations in the 800MHz, 1,800MHz and 2,600MHz bands. The proposed extension stipulates new coverage obligations for the three operators concerned, focusing mainly on improving their networks in rural areas and along roads. In addition, established operators would have to give newcomer 1&1 some access to sub-1GHz bands.

Höttges said the BNetzA proposals "really got under my skin." While DT welcomes the move to extend usage rights for these three bands rather than hold an auction in 2025, he said the "entirely unrealistic" coverage obligations will be expensive and "completely wipe out the intended effect of awarding the licenses." 

"The problem is that the nationwide coverage obligations are not to the benefit of customers. They are not proportionate, and apart from anything else they are impossible to fulfil in reality. Thirty percent of Germany is woodland, 6.5% is made up of nature reserves and we already face huge problems finding locations and getting construction permits in these very areas," he added.

He also maintained his objections over what he sees as preferential treatment for newcomer 1&1, which is in the processing of building a fourth 5G network based on open RAN technology but has been beset by delays.

"Despite repeatedly disregarding all obligations and commitments, 1&1 is supposedly receiving additional spectrum that is already being used by millions of customers," he said.

He added: "Why is it that 1&1 is getting such unilateral political support? There are three established players who are spending a lot of money, who are making a big effort to meet the obligations of the federal network agency and all the other obligations. And then there's one player who doesn't seem to care about those obligations at all."

T-Mobile: tapping into new markets 

On the other side of the Atlantic, T-Mobile US already published its results at the end of April, but Höttges was still keen to praise the group's traditionally strong performer and said further growth was expected over the course of the year. He also highlighted the American operator's recent agreement with private equity firm EQT to buy Lumos, a fiber network operator based on the East Coast. 

"This means that we are tapping into new markets and revenue prospects and we can limit the money we put into these efforts because we share the investments with EQT … This is an interesting strategic move for us at Deutsche Telekom," he commented.