* Europe has 100 operators, the United States only 3, CEO
says
* Eyes consolidation costs benefits
* Issues upbeat guidance after results top expectations
(Recasts on call for European mergers)
By Douglas Busvine
Feb 26 (Reuters) - Deutsche Telekom renewed its
call for European industry consolidation on Friday, saying the
region's sub-scale operators were not in a position to invest
more in 5G networks as weak profits and high debts weigh.
CEO Tim Hoettges drew a stark contrast between Europe's
100-plus mobile operators and the U.S. market, where the field
shrank to three players last April when Deutsche Telekom's unit
T-Mobile took over Sprint for $26 billion.
"The industry is in a dilemma that it can only escape
through cost synergies," Hoettges told a news conference after
Deutsche Telekom reported forecast-beating results for the
fourth quarter.
"I believe deeply that European consolidation is necessary,"
Hoettges added, echoing remarks he made last August.
EUROPE LAGS
Outperformance at T-Mobile, which achieved double-digit
growth in organic profit and accounted for three fifths of group
revenue last year, has overshadowed more pedestrian progress at
Deutsche Telekom's European operations.
That has also led investors to value Deutsche Telekom's U.S.
operations more richly than those on its German home market and
across Europe.
Of Deutsche Telekom's $87 billion market capitalisation, its
43% stake in T-Mobile is worth $65 billion, meaning the European
part of the business is worth only $22 billion.
Yet Deutsche Telekom is in a strong position relative to its
European peers, Hoettges said. Vodafone is worth $47
billion, Orange $32 billion and Telefonica
$25 billion.
Deutsche Telekom is not in active merger talks but is
actively looking for network infrastructure partners for its
mobile-only operations in Poland and the Czech Republic,
Hoettges said.
"We are open to light or heavy partnerships," he said,
indicating that some form of equity participation could be part
of any deal.
GUIDING FOR GROWTH
Deutsche Telekom provided upbeat 2021 guidance, saying it
expected core profit of 37 billion euros ($45 billion) this
year, implying growth of 5.7%, while free cash flow would rise
27% to 8 billion euros.
Analysts said the outlook for Telekom's European business
was in line with expectations. They also welcomed clarity on
investment in its German fibre-optic network, which will
accelerate in 2022 with a goal of reaching every household by
2030.
After stripping out the effects of the U.S. merger and other
one-offs, organic revenue rose by 5.4% in the fourth quarter
while adjusted earnings before interest, tax, depreciation and
amortisation after leases (EBITDA AL) grew 9%.
Management confirmed it would propose an unchanged dividend
of 0.60 euros for 2020.
Deutsche Telekom shares reversed early losses to trade 1%
higher in Frankfurt, outperforming blue-chip stocks that were a
little down on the day.
($1 = 0.8228 euros)
(Reporting by Douglas Busvine
Editing by Thomas Escritt and David Goodman)