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Author: Katharina Grimme
As part of Deutsche Telekom group (see EuroView Daily, 10 August 2006), T-Systems reported H1 2006 revenues of €6.2bn, down 2.7% on the same period in 2005. EBITDA (adjusted) stood at €667m, down 18.2%. The Enterprise Services (ES) division, which sells to T-Systems' top 60 global accounts, generated €4bn in revenues, down 3.1% on H1 2005. Revenues in the Business Services (BS) division, which sells to 160,000 smaller accounts, amounted to €2.2bn, down 1.9%.
As a consequence of these results, T-Systems has reduced its expectations for full year 2006 from around €13.5bn to €12.7bn.
Comment: T-Systems is increasingly feeling competitive pressures in the telecoms and desktop-services businesses, which still account for a too-large share of its overall operations. Selling these services, especially in the Enterprise Services business unit, is proving ever more difficult, illustrated by a decrease in non-captive revenues by 2%.
The good news is that T-Systems managed 13.7% growth outside of Germany, mostly due to the gedas acquisition, which was fully consolidated in the figures as of 31 March 2006. Gedas also contributes to a net revenue increase in the systems-integration division.
In the Business Services division, IT services for SMEs have not managed to counter declining revenues from traditional data communication services.
All in all, this is a continuation of the problems that T-Systems has been facing for a while - and recent deal wins (Volkswagen, DaimlerChrysler, Hypovereinsbank) have not been able to reverse this trend. The key problem lies in the domestic market, on which T-Systems is still highly dependent, and in the fact that the company is too heavily dependent on commodity-type services (telecoms and desktop service) that are faced with tough competition, leading to price and margin pressures.
T-Systems is struggling to reverse this situation through a strong focus on international growth and a move to higher-margin services, such as BPO. It seems, however, that this move is happening too slowly. We wonder when parent Deutsche Telekom will lose its patience with T-Systems, in particular since DT CEO Kai-Uwe Ricke is under increasing pressure from shareholders to improve the company's overall results...
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