Deutsche Telekom (GR) (OTC:DTEGY) released its Q2 results today, with adjusted EBITDA AL (after leases) growing 1.5% to €10.0 billion (€1 = $1.0977), slightly above the consensus estimate. In organic terms, it grew by 3.8 %.
The company raised its 2023 operating profit target a second time, now expecting EBITDA AL of approximately €41.0B (vs. prior €40.9B), which would represent a 4% year-over-year growth. The consensus estimate stood at €40.4B. The guidance increase is driven by the Group ex-T-Mobile (new EBITDA AL target of €14.0B, vs. old target of €13.9B), even if T-Mobile U.S. Inc (NASDAQ:TMUS) did also increase its adjusted Core EBITDA outlook with its recent Q2 earnings announcement.
Group FCF guidance remained unchanged at >€16B, implying a 40% year-over-year growth.
“We continued our successful course in the second quarter. Our businesses are developing well, despite complex market environments. This is underscored by our organic growth rates for service revenues, earnings, and free cash flow,” said CEO Tim Höttges.
Following the announcement, UBS reiterated its Buy rating and a €25.70 price target on the company, noting they believe the 12% decline in share price over the past 3 months is overdone and is primarily driven by concerns about Amazon's (NASDAQ:AMZN) potential offer of a free or heavily discounted mobile service to its U.S.-based Amazon Prime members.
“While U.S. investors have shrugged off the impact given the recovery in the TMUS share price, this has not been reflected in DT shares despite recent clarity on the issue, which we see as an anomaly. We see the recent 1&1/Vodafone NRA deal as neutral for DT with a limited impact in the near- term, but there may be question about competitive dynamics in the German market medium-term,” mentioned UBS.