FTGraphic Tim Hoettges, chief executive officer of Deutsche Telekom AG, speaks during a full year earnings news conference at the company's headquarters in Bonn, Germany, on Thursday, Feb. 22, 2018. Deutsche Telekom reported earnings that missed analysts' estimates as Hoettges invests in fiber in Germany to win customers after failing to clinch a mega-merger for T-Mobile US Inc. in the U.S. Photographer: Alex Kraus/Bloomberg
Chief executive Tim Höttges highlighted Deutsche Telekom’s ability to deliver dividend © Bloomberg

A soft outlook for 2018 from Deutsche Telekom overshadowed a strong set of results for 2017, sending shares in Europe’s largest telecoms company down even as the group raised its dividend.

Shares in Deutsche Telekom were down more than 2 per cent by midday to €12.98, as the strong 2017 performance failed to reverse a decline in the stock that has seen the company lose almost a quarter of its value over the past year.

Earnings before interest taxation depreciation and amortisation fell almost 5 per cent in the fourth quarter to €5bn, 4.4 per cent below expectations, according to analysts at Jefferies. A 29 per cent rise in its net profit to €3.5bn reflected a one-off gain at its US division related to changes to the tax laws.

The guidance for 4 per cent growth in 2018 was described as “soft” and “unspectacular” by analysts, who had expected a stronger outlook given Deutsche Telekom’s robust performance in its home market and the US, where it controls fast-growing mobile company T-Mobile USA.

Chief executive Tim Höttges, whose contract was extended for five years earlier this week, pointed to the company’s ability to deliver dividend, which has risen 30 per cent in three years, despite investing €12bn into its networks.

“In 2017, we once again kept our promises. We also want our shareholders to profit from our success, which is why we are planning to increase the dividend for the third time in succession,” he said.

The European telecoms sector has started to return to growth after years of decline. French telecoms group Orange recorded its first revenue growth in almost a decade during 2017, while rival Bouygues increased revenues during the fourth quarter by 5.4 per cent, more than double forecasts.

Spanish telecoms company Telefónica said operating profit before depreciation and amortisation was up by more than a fifth to €3.9bn, and up 7 per cent for the full year to €16.2bn on the back of strong performance in Latin America.

The company added that it will be “very active” in managing its assets, and is said it hopes to pursue an initial public offering for its O2 mobile network in the UK rather than selling a stake in the network to a private investor as it did with Telxius, the masts and cable division of Telefónica. The company has been tipped to go public since last year but has had to await the outcome of the UK spectrum auction that could take place as soon as April.

O2 has also been seen as a potential acquisition target for Liberty Global, owner of Virgin Media.

Telefónica also cooled expectations that it would make a bumper bid for Champions Leagues rights in September, after management said it was possible it may not renew its rights packages. Angel Vila, chief operating officer, said that the results of the UK and Portuguese auctions saw the proceeds drop substantially, marking the latest sign that telecoms companies are trying to lower the cost of acquiring exclusive content.

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