Deutsche Telekom hit by weakness in home market

By Marleen Kaesebier and Maria Rugamer

-Deutsche Telekom reported second quarter core profit in line with analyst expectations on Thursday but its shares fell as much as 6% as investors focused on weaker results in its domestic market.

The Germany-based telecoms giant reported second quarter adjusted earnings before interest, taxes and amortization after leases (EBITDA AL) of 11 billion euros ($13 billion). That compared with the 10.95 billion euros expected by analysts in a company provided poll.

In its home market, revenues declined 1.3% from last year.

A local trader said that performance in Germany was mixed, in part due to stronger competition.

Competitor Vodafone in July said it is close to returning to growth in Germany, its biggest market, after struggling with a German regulation change for selling cable television to apartments that seemed to benefit Deutsche Telekom.

While Deutsche Telekom's mobile customers in Germany grew 1.9% from March, it lost 20,000 broadband lines in the country, J.P. Morgan analyst Akhil Dattani wrote in a note. He added that this followed a similarly weak performance from Vodafone.

Telekom's IT service provider unit, T-Systems, meanwhile saw an order entry increase of 20.5% from last year, particularly in road charging and digital areas, the company said.

The unit is at the forefront of a collaboration with Nvidia announced in June to establish an artificial intelligence cloud for European manufacturers in Germany.

Deutsche Telekom is also in the process of seeking European Union support to build an AI data processing centre in Germany.

The group slightly raised its core profit guidance for 2025 on Thursday, now expecting more than 45 billion euros, adjusted from around 45 billion euros expected before.

It also adjusted its free cash flow AL expectations for 2025, now expecting over 20 billion euros from around 20 billion euros.

The new guidance comes after its New York listed subsidiary T-Mobile US in July raised its annual forecast for postpaid net customer additions after adding more wireless subscribers than expected in the second quarter.

Deutsche Telekom shares were down 4.1% at 0730 GMT, paring losses after falling as much as 6.1%.

($1 = 0.8566 euros)

(Reporting by Marleen Kaesebier and Maria Rugamer in Gdansk and Hakan Ersen in Frankfurt; Editing by Matt Scuffham)