Deutsche Telekom's Q4 profit declines 9% due to dollar drag, lowers outlook for German market

Investing.com - Germany’s Deutsche Telekom reported a 9.2% decline in adjusted net profit for Q4, as a weakening dollar eroded earnings from its subsidiary T-Mobile US. The German telecom giant quietly lowered its growth outlook for the domestic market.

Get real-time market news and analyst alerts on InvestingPro — up to 50% off

In the three months ending December, adjusted net profit fell from €2.35 billion to €2.13 billion year-over-year. Adjusted earnings per share were €0.44, compared to the market consensus of €0.45.

Group revenue for the quarter increased 2.5% to €31.72 billion, with organic growth of 5.5%. Post-lease adjusted EBITDA grew 1.9% to €10.83 billion, masking a 5.6% organic growth rate. The company stated that dollar headwinds caused a €706 million loss in this quarter.

“Organic service revenue is expected to grow 3.8% in fiscal 2025, post-lease adjusted EBITDA to grow 4.7%, post-lease free cash flow to increase 2.0%, and adjusted EPS to grow 5.2%,” the company said in its earnings report.

Full-year adjusted EPS rose 5.2% to €2, excluding €0.03 of non-recurring items in 2024, organic adjusted EPS increased 7.7%. Post-lease free cash flow grew 2.0% to €19.55 billion, meeting the full-year guidance.

Deutsche Telekom’s domestic market is its second-largest profit contributor, with post-lease adjusted EBITDA growth of only 1.7% for the year, below the targeted compound annual growth rate of 2%-2.5% through February 2027.

The company confirmed the target but indicated growth may be at the low end due to higher-than-expected broadband customer churn and weak enterprise revenue in 2025.

In Germany, organic revenue grew 2.8 in Q4, reversing three consecutive quarters of contraction, although broadband net adds only recovered to 2,000 customers after losing 7,000, 20,000, and 25,000 in the previous three quarters.

Fiber customers reached 580,000, with a target of about 1 million by 2027. The number of households covered reached 12.6 million, with a goal of 17.5 million.

Germany’s total service revenue grew 1.1% for the year, while the compound annual growth rate target announced at the Capital Markets Day was 2.5%-3%.

Deutsche Telekom holds a 52.6% stake in T-Mobile US at year-end, which has since increased to 52.8%. T-Mobile US’s Q4 revenue was $24.4 billion, up 11.7%, driven by the US Cellular acquisition. Under US GAAP, full-year core adjusted EBITDA increased 6.8% to $33.92 billion.

In Q4, T-Mobile added 2.4 million postpaid net customers, which the company says is industry-leading, while postpaid phone churn rose from 0.89% last quarter to 1.02%, attributed to industry number porting increases.

Deutsche Telekom’s European business achieved its 32nd consecutive quarter of organic EBITDA growth, with post-lease adjusted EBITDA up 5.3% to €1.13 billion in Q4.

Full-year service revenue grew organically by 3.9%. The enterprise business unit T-Systems saw full-year revenue increase 3.0% to €4.1 billion, with post-lease adjusted EBITDA up 14.4% to €427 million.

Net debt excluding lease obligations decreased 1.3% to €98.07 billion. The leverage ratio was 2.62 times adjusted EBITDA, within the company’s target range of no more than 2.75 times. The board proposed a dividend of €1.00 per share, subject to shareholder approval.

For 2026, Deutsche Telekom expects group post-lease adjusted EBITDA of approximately €47.4 billion, group post-lease free cash flow around €19.8 billion, and adjusted EPS of about €2.20, based on an EUR/USD exchange rate of 1.13. The market consensus expects a rate of 1.17, which would lower the EBITDA guidance to about €46.4 billion, aligning with the pre-earnings market expectation of €46.5 billion.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.