We are downgrading Deutsche Telekom (DT), the top telecom carrier in Germany, to Underperform. Reported earnings and revenue for the last quarter missed the Zacks Consensus Estimates.
Deutsche Telekom continues to face a weak economy with further declines in Germany’s fixed-line telephony business due to intense competition. The company’s domestic and UK operations remain significantly challenged by regulatory pricing pressure.
Moreover, the carrier’s US unit TMobile USA is struggling with declining sales as it contends with aggressive price competition. While Deutsche Telekom remains committed to its cost-cutting initiatives, we account for the increasing debt exposure and higher capital spending levels which may tighten future free cash flow.Zacks Investment Research
