What's going on?
Europe’s largest telecommunications firm, Deutsche Telekom, dialed in well-received first-quarter results on Thursday – but results from the UK’s BT weren’t as loud and clear.
What does this mean?
Last quarter, Deutsche Telekom’s profit grew 4% compared to a year prior – and it had its American line largely to thank. Deutsche’s T-Mobile US added over a million new customers every quarter for the sixth year in a row, gaining ground on market leaders AT&T and Verizon. At home in Germany, selling more bundled packages of landline and mobile services helped earnings there grow too.
BT phoned in a decline in its annual profit – and its forecast for this year was below investor expectations. The company plans to step up investment in high-speed broadband infrastructure that might help the stock reconnect with investors.
Why should I care?
For markets: Investors hang on the line for telecoms.
Phone, wireless data, and broadband contracts are typically long-term. Despite price comparison tools to help you switch, only 10 million of America’s 400 million data contracts change provider each year. And connectivity’s likely to be the last thing scrapped by penny-pinching consumers when times are hard – so telecoms typically have predictable earnings and can pay regular dividends. BT on Thursday promised its annual dividend wouldn’t fall despite major investment plans this year. The company’s value represents over 1% of the British stock market and its regular payout is therefore important enough to keep investors in the UK on hold.
The bigger picture: Regulators call Sprint and Vodafone.
Japanese tech powerhouse SoftBank reported an 80% jump in its quarterly profit on Thursday, half of which was thanks to gains in the value of its investments – including a lift from Uber before its Friday stock market debut. SoftBank is also the biggest investor in American wireless carrier Sprint – whose proposed deal to merge with rival T-Mobile US last year is still at the mercy of competition regulators. And on Wednesday, Australian authorities blocked Vodafone’s $11 billion plan to take over the number-two internet service provider Down Under, TPG.