Deutsche Telekom second-quarter results buoyed by Sprint consolidation

BERLIN (Reuters) - Deutsche Telekom reported jumps in quarterly revenue and profit on Thursday following U.S. unit T-Mobile’s $23 billion takeover of Sprint, while its underlying performance beat market expectations.

The telecoms group issued fresh guidance for core profits to hit 34 billion euros ($40 billion) this year, above market expectations, but cautioned that the cost of integrating Sprint would dent group cash flow.

The Sprint deal, which closed on April 1, has tilted Deutsche Telekom’s centre of gravity towards the United States where T-Mobile now generates over three fifths of group revenue and has challenged AT&T as the No.2 carrier.

“The merger in the United States is a historic step for the group,” said CEO Tim Hoettges, calling the figures “formidable” while highlighting strong performance on Deutsche Telekom’s German home market and in Europe.

Group revenue grew by 37.5% to 27 billion euros in the quarter, but after stripping out the impact of the U.S. merger and exchange-rate effects there was a 0.6% decline. Analysts had forecast 25.6 billion, according to a company poll.

Core profit, measured as earnings before interest, taxation, depreciation and amortization after leases (EBITDA AL), rose by a reported 56.4% to 9.8 billion euros. On an organic basis it rose 8.4%, also beating expectations.

Deutsche Telekom issued new guidance for EBITDA AL to reach around 34 billion euros this year, up from previous guidance for 25.5 billion and around a billion euros above consensus.

It lowered its forecast for free cash flow after leases to at least 5.5 billion euros - below the average forecast from analysts and down from a previous 8 billion euros - to factor in the integration costs of the U.S. merger. ($1 = 0.8472 euros)

Reporting by Douglas Busvine; Editing by Maria Sheahan