German telecom giant Deutsche Telekom (NYSE: DT) will take to the airwaves Thursday to report its second-quarter earnings. Before the main event, we'll give you a preview.
What analysts say:
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Buy, sell, or waffle? There's a wide swath of international analysts -- 42 total -- who give an opinion on the company. In true bell-shaped-curve fashion, 11 rate the stock a buy, 20 say hold and 11 analysts recommend selling. In our Motley Fool CAPS investor database, 113 of our 60,000 total users have rated the stock, also falling on the mean and giving it a three-star rating.
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Revenue. On average, analysts look for Deutsche Telekom to report $21.5 billion in revenue this quarter, up 12% from the $19.2 billion last year.
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Earnings. The average analyst is guessing a profit of $0.17 per share for the quarter.
What management says:
With the ongoing decay in domestic revenue, Deutsche Telekom has been shoring up defenses at home while implementing a fast-moving offense abroad. Stiff competition and a crushing regulatory environment in Germany led to a revenue decline of 5.1% there last quarter. Stating the obvious, CEO Rene Obermann acknowledged that "we are fully aware that here in Germany we are exposed to considerable competitive pressure." According to the company, the way out of the mess "is to improve the company's competitive standing" domestically. Hmm, OK.
To this end, the company is implementing a "focus, fix and grow" strategy that has it plugging leaky revenue holes while expanding in high-growth markets abroad. Similar to global telecoms such as Vodafone (NYSE: VOD), Telefonica (NYSE: TEF), and VimpelCom (NYSE: VIP), Deutsche Telekom is tapping more fertile growth markets in developing countries.
What management does:
The pain of deregulation in its home market clearly shows in the company's margins. It has been downhill virtually all the way for the past 18 months as the company loses lines and premium pricing leverage to competition.
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Margins
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12/05
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03/06
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06/06
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09/06
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12/06
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03/07
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Gross
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46.6%
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46.6%
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46.3%
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45.6%
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43.4%
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42.7%
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Operating
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16.3%
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16.2%
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15.1%
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13.5%
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8.5%
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7.5%
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Net
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9.4%
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9.5%
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9.1%
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8.3%
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5.2%
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4.1%
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All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
Battling with mandated roaming fee caps and regulations to open up its broadband lines will continue to hammer on Deutsche Telekom's domestic business, yielding little opportunity for growth in the near future. Staff reductions meant to help stem the bleeding is one of only a few ways the giant can deal with domestic market pressures.
The U.S. subsidiary, T-Mobile USA, continues to be a standout property as its low-price, more-minutes strategy helps it steal customers from competitors Sprint Nextel (NYSE: S) and AT&T (NYSE: T). But T-Mobile has some catching up to do in terms of broadband wireless offerings, so it will be interesting to hear how well T-Mobile USA has fared this quarter.
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Fool contributor Dave Mock tends to favor the light and flavorful ahi tuna over the rubbery and tasteless octopus. He owns no shares of companies mentioned here. Dave is the author of
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