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Author: Katharina Grimme
As part of the Deutsche Telekom Group (see EVD of 9 Nov 2006), T-Systems reported Q3 2006 revenues of €3.1bn, down 0.6% on the same quarter in 2005. Adjusted EBIT stands at €88m, down 62%, resulting in an EBIT margin of 2.8%, compared to 7.4% in Q3 2005. The Enterprise Services (ES) division generated €2.1m revenues, up 0.7%, while Business Services (BS) revenues amounted to €1.1m, down 3%.
Comment: There are no real surprises in these figures, but rather a continuation of the problems we have highlighted before (see EVD of 14 August 2006). T-Systems' business is still too dependent on telecoms (legacy voice and data) and desktop services operations, and on the German market. The decline in revenues seen in these areas cannot (as yet) be compensated with higher-margin IT services and/or international business. This is despite the gedas acquisition, which has helped to grow international revenues by 26% compared to Q3 2005, and a focused international growth approach in selected Western European countries, which has led, for example, to a deal win with the Madrid Tax Authority, a pilot project for the UK Census and a strategic partnership with Swiss bank Vontobel.
We expect the results not to significantly improve any time soon. With continuing cost cutting and efficiency measures, restructuring and consolidation initiatives as well as the gedas integration underway, it will be some time until the results of this show up in the figures. The question remains as before: can T-Systems recover fast enough for Deutsche Telekom (and the market) not to lose patience?
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