* Sees free cash flow of 4.5 bln eur vs 5 bln previously
* Q2 EBITDA ex-items 4.4 bln eur, in line with Reuters poll
* Sees 2013 EBITDA ex-items 17.5 bln vs poll avg of 17.8 bln
* Shares 4.7 pct higher, outperforming sector
By Harro Ten Wolde
FRANKFURT, Aug 8 Deutsche Telekom is
boosting marketing spend in the United States to sustain the
pace of acquisition-driven customer growth after adding
subscribers for the first time in years.
The extra marketing outlays prompted the company to cut its
free cash flow target for this year to around 4.5 billion euros
($5.99 billion) from initial forecasts of 5 billion.
"We are in the middle of a massive turnaround in the United
States and we want to carry on along this successful course. We
are prepared to spend more on high-value growth this year than
previously planned," said outgoing Chief Executive Rene Obermann
in a statement.
The company added 688,000 contract customers at T-Mobile US
in the second quarter, the first gain after 16
consecutive quarters of losses, helped by its Apple
iPhone launch and marketing of a new pricing policy.
T-Mobile US, the No. 4 U.S. mobile service provider,
eliminated phone subsidies and set up instalment payment plans
so customers could upgrade their phones more often.
Deutsche Telekom said it expected T-Mobile US to add 500,000
to 700,000 new customers in the second half of the year,
resulting in total annual customer growth of 1-1.2 million
Previously it had said it was aiming to keep its customer
As a result, Deutsche Telekom expects to invest an
additional $600 million this year in its U.S. business, Chief
Financial Officer Timotheus Hoettges told reporters.
"We think investing in the U.S. now is the right decision,
and will make the most of the momentum in T-Mobile US," said
analyst Robin Bienenstock at Bernstein Research.
"The dividend of 0.50 euros remains well covered for this
year and next, with improving growth prospects thereafter," the
Deutsche Telekom shares were 4.7 percent higher by 0930 GMT,
outperforming the European sector index which was up 0.7
TOP SPOT REGAINED
Second-quarter earnings before interest, tax, depreciation
and amortisation (EBITDA) excluding special items came in 6
percent lower at 4.4 billion euros, in line with an average
forecast in a Reuters poll.
In its home market Germany, the former monopoly said it had
regained the top spot from Vodafone in the mobile
services market, with around 114 million subscribers the
European Union's largest.
The once cosy German mobile market has turned highly
competitive as customers catch up with the rest of Europe in
switching to smartphones from basic mobiles.
Last month the two smaller mobile operators E-Plus and
Telefonica Deutschland announced plans to merge, which will turn
the combination into the country's third-biggest mobile player,
with a 30 percent market share, close behind Deutsche Telekom
and Vodafone with 35 percent each.
Deutsche Telekom said mobile service revenues rose during
the quarter by 1 percent, excluding the effect of lower mobile
termination rates, and that it was the only German network
operator to have booked a gain.
The company said it expected EBITDA before special items to
come in at around 17.5 billion euros in 2013, which includes
profit from MetroPCS.
This is lower than even the most pessimistic estimate of
17.6 billion euros from a Reuters poll, however, as analysts
expected a higher contribution from MetroPCS.
Previously Deutsche Telekom had guided for EBITDA of around
17.4 billion euros excluding MetroPCS.