On a day when most investors in U.S. markets were running for shelter from increased concerns over bad debt, investors in German telecom giant Deutsche Telekom (NYSE: DT) were feeling a little light on their feet. The company reported its second-quarter and consolidated results for the first half of 2007, demonstrating to investors that despite a crushing competitive market at home, the company can make positive strides internationally.
Germany's largest telecom company reported second-quarter net earnings of $840 million, on $21.5 billion in revenue. Reported revenue rose 2.9% year over year, driven by an impressive 13.7% increase in sales from international operations. Domestic revenue for the quarter fell 6.3%, as the company lost 516,000 fixed lines in Germany to wireless alternatives and Web communications services such as eBay's (Nasdaq: EBAY) Skype.
Deutsche Telekom's wireless subsidiary in the U.S., T-Mobile USA, remains a standout contributor. The No. 4 carrier outpaced competitor Sprint Nextel (NYSE: S) and added 857,000 net subscribers in the quarter, with 80% of these signing contract commitments. Blended churn ticked up by 10 basis points sequentially, to 2.8%, because of higher terminations in the prepaid base, but the company showed solid improvements in almost every other metric. Keeping pace with leaders AT&T (NYSE: T) and Verizon Wireless (a joint venture of Verizon Communications (NYSE: VZ) and Vodafone (NYSE: VOD)), the firm also drove an increase in average revenue per user (ARPU) to $53, topping last quarter's $52.
While the results were lined with both positive and negative surprises, overall, the company made good strides in adapting its business to a rapidly changing telecommunications market. Management emphasized that the company is making progress; CEO Rene Obermann stated, "we are on the right track with our activities to become more competitive and keep our costs under control."
But the good news came with a warning. Obermann quickly added, "We should not let this hide the fact that our journey is far from over and will not become any easier as we continue on this path." Indeed, with more regulations coming to open up the German market and cut costs to consumers, Deutsche Telekom can't rest on its laurels, even for a moment.
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Fool contributor Dave Mock wouldn't touch peas porridge, neither hot nor cold, and definitely not if it has been in a pot for nine days. He owns no shares of companies mentioned here. Dave is the author of
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