Deutsche Telekom Has 4th-Quarter Loss on Toll Charges (Update8)
March 10 (Bloomberg) -- Deutsche Telekom AG, Europe's largest phone company, reported its first loss in four quarters after setting aside 442 million euros ($543 million) for a faulty truck-toll system it developed with DaimlerChrysler AG.
The net loss in the fourth quarter widened to 364 million euros from 77 million euros a year earlier, Deutsche Telekom said at a press briefing at its Bonn headquarters. Sales were little changed at 14.5 billion euros in the quarter.
Chief Executive Kai-Uwe Ricke, who sold assets including cable-television networks to reduce debt by a quarter last year, said today he is ready to make ``selective acquisitions'' to spur growth. Deutsche Telekom has also renegotiated its truck-toll contract with the German government to recoup some losses.
``Ricke's next big challenge will be to cut costs in coming years,'' said Frank Heise, who holds Deutsche Telekom shares among the equivalent of $120 billion he helps manage at Union Investment in Frankfurt. ``Let's hope that the truck-toll was a one-time glitch, though I'm a little concerned that we haven't seen all the costs from the project yet.''
Debt fell to 46.6 billion euros at the end of 2003 from 61.1 billion euros a year earlier. For all of 2003, Deutsche Telekom had net income of 1.25 billion euros, its first full-year profit since 2000, after a record loss of 24.6 billion euros in 2002.
The shares declined as much as 2.6 percent to 15.51 euros and traded at 15.62 euros as of 1:25 p.m. in Frankfurt.
No Dividend
Deutsche Telekom won't pay a dividend for a second year. It will resume paying a dividend next year, it said. Other European phone companies including France Telecom SA and Royal KPN NV have resumed dividends as profit in the industry rises and debt falls.
The Toll Collect GmbH venture between Deutsche Telekom and DaimlerChrysler, which was created to provide a satellite-based system collecting fees for trucks using Germany's highways, failed to meet deadlines to provide a working system. DaimlerChrysler, the world's fifth-largest carmaker, had a 250 million-euro loss from its stake in Toll Collect.
Deutsche Telekom exceeded its full-year forecast of 18.2 billion euros in adjusted earnings before interest, taxes, depreciation and amortization by 100 million euros. Profit on that basis will rise to at least 19.2 billion euros this year, the company said today, reiterating a November forecast.
``Management has overcome quite a few hurdles in the past year,'' said Martin Sirch, who helps manage $150 billion at HSBC Asset Management in Dusseldorf, Germany, including Deutsche Telekom shares. ``Debt has reached a manageable level.''
Toll Collect
Deutsche Telekom's T-Systems unit is taking over operational leadership of Toll Collect after Telekom and DaimlerChrysler reached a new agreement with the government last month. The system, delayed since last August, should be fully operational by Jan. 1, 2006, the companies said in February.
Debt at the end of the year beat 42-year-old Ricke's target of between 49.5 billion euros and 52.3 billion euros. The reduced debt prompted Moody's Investors Service to raise its rating on Deutsche Telekom to Baa2 with a stable outlook last week, the first rating increase after four cuts by Moody's since the beginning of 1998.
Bonds Decline
Deutsche Telekom's bonds fell, according to RBC Capital Markets prices on Bloomberg. The spread, or extra yield investors demand to buy the company's 4.5 billion euros of 5.875 percent bonds due in 2006 instead of government debt of similar maturity, widened by 2 basis points to 63. A basis point is 0.01 percentage point.
Standard & Poor's rates Deutsche Telekom BBB+, three steps above non-investment grade, and today put the company's rating on review for a possible upgrade. Any increase in ratings would be limited to one level, S&P said in a statement sent by e-mail.
``I feel a lot more comfortable now with our rating than I did about a year ago,'' Chief Financial Officer Karl-Gerhard Eick said at the press conference.
Revenue at the T-Com fixed line unit declined 7.1 percent to 7.5 billion euros while adjusted Ebidta dropped 2.5 percent to 2.6 billion euros. The unit has been losing business to local resellers that use Deutsche Telekom's network after the regulator last year opened the local grid to competition.
Mobile Profit
At the mobile unit, the world's fourth-largest in terms of subscriber numbers, revenue rose 9.1 percent to 6 billion euros. Adjusted Ebidta soared 40 percent to 1.6 billion euros.
Deutsche Telekom added 7.6 million new mobile-phone users last year, buoyed by holiday-season demand and growth at the T- Mobile USA unit that outpaced rivals. In the U.S, where T-Mobile ranks as No. 5 among U.S. wireless operators, it added 1.02 million customers in the fourth quarter, more than larger AT&T Wireless Services Inc. and Cingular Wireless LLC put together.
Ricke stood by last month as Cingular and Vodafone Group Plc bid for AT&T Wireless, saying Deutsche Telekom would benefit from U.S. wireless market consolidation. The combination of the two U.S. operators will give T-Mobile USA a higher chance of reaching growth targets, he said today.
The growth at the wireless unit counters falling revenue from the fixed-line business, as customers use their mobile phones more and competition increases. Resellers of local-call minutes, who entered the market last year, account for about 15 percent of local phone calls placed on Telekom's infrastructure.
T-Online International AG, the Internet unit of Deutsche Telekom, already reported fourth-quarter earnings yesterday. A 9.8 percent increase in sales was the slowest quarterly revenue growth in more than a year as T-Online lost market share to competitors. The company had net income of 5.4 million euros in the period because of a tax gain.
Deutsche Telekom report first loss in four quarters
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10-03-2004 04:37
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