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* Q2 results, annual guidance ahead of market consensus
* Integration of Sprint on track
* Management flags strong performance of non-U.S. businesses
* Well placed to drive European industry consolidation - CEO
(Adds comments on valuation of non-U.S. business, M&A)
By Douglas Busvine
BERLIN, Aug 13 (Reuters) - Deutsche Telekom's
reported forecast-beating second quarter results on Thursday,
lifted by the $23 billion takeover of Sprint by its U.S.
business T-Mobile, and said it was looking to do deals
in Europe from a position of strength.
The Sprint transaction, which closed on April 1, has tilted
Deutsche Telekom's centre of gravity towards the United States
where T-Mobile now generates three fifths of group revenue and
has challenged AT&T as the No.2 carrier.
Chief Executive Tim Hoettges is now turning his attention to
Europe, where he said Deutsche Telekom was well placed to drive
consolidation after its market value grew to 72 billion euros
($85 billion), putting it ahead of competitors Vodafone,
Telefonica and Orange.
"We have created a currency (in the form of our shares) that
protects us against possible takeovers, and that we can also put
to work," he told reporters on a conference call.
The transatlantic telecoms group issued new guidance for
core profits to hit 34 billion euros ($40 billion) this year,
above consensus forecasts, but said the cost of integrating
Sprint would initially dent group cash flow.
A 47% rally in the T-Mobile share price this year has,
however, not been matched by Deutsche Telekom's own shares,
which even after trading 2% higher on Thursday are ahead by just
6%.
Deutsche Telekom's 43% stake in its U.S. business is now
worth $61 billion, putting a so-called "stub" equity value on
the rest of the group of just $23 billion.
OPERATIONAL EXCELLENCE
Recognising that shift, management highlighted strength of
Deutsche Telekom's German home market - where fixed-line gains
offset mobile service revenues hit by the coronavirus pandemic -
and in its Europe division.
"The best way to improve the valuation of the non-U.S.
business is operational performance - and that was very
impressive in the second quarter," said Chief Financial Officer
Christian Illek.
As for potential restructuring measures that could realise
value, Illek said no decision had been taken on the future of
Deutsche Telekom's towers unit, while it was considering options
for its Dutch mobile operator.
Group revenue rose by 37.5% to 27 billion euros in the
quarter, above expectations, although after stripping out the
impact of the U.S. merger and exchange-rate effects there was a
0.6% decline.
Core profit, measured as earnings before interest, taxation,
depreciation and amortization after leases (EBITDA AL), rose by
a reported 56.4% - also beating expectations - while on an
organic basis it rose 8.4%.
($1 = 0.8472 euros)
(Reporting by Douglas Busvine; Editing by Maria Sheahan and
Jane Merriman)
