T-Mobile US Earnings Give Deutsche Telekom a Lift as Labour Dispute Clouds the Outlook

T-Mobile US beats Q1 forecasts, lifting guidance and buybacks, while a Verdi union strike disrupts Deutsche Telekom's domestic operations and fibre expansion ahead of May 13 results.

Deutsche Telekom finds itself caught between two very different worlds. Across the Atlantic, its American subsidiary T-Mobile US is firing on all cylinders, smashing analyst forecasts and handing management the confidence to raise its guidance. Back in Germany, however, the mood is more fraught. A bitter pay dispute with the Verdi union has escalated into widespread strike action, putting pressure on customer service and the company’s ambitious fibre rollout.

The tension has been reflected in the share price. The stock closed at €27.57 on Tuesday, having shed nearly 14% over the past month. That leaves it trading well below its medium-term trendline and uncomfortably close to its 12-month low. Yet the latest numbers from T-Mobile US have helped the shares find a floor, at least for now.

US powerhouse delivers

T-Mobile US reported a standout first quarter. Revenue jumped 11% to $23.1 billion, while operating profit climbed to $9.2 billion. The carrier added 217,000 postpaid phone customers, beating consensus expectations. Earnings per share came in at $2.27, also ahead of forecasts. Net income fell to $2.5 billion, but that was largely due to costs tied to recent acquisitions — a one-off drag rather than a sign of underlying weakness.

The strong performance prompted management to lift its full-year outlook for new contract customers to as many as 1.05 million, up from a prior ceiling of 1 million. More importantly for shareholders, the board authorised an increase in the capital return programme to $18.2 billion, an additional $3.6 billion that will go towards buybacks and dividends.

Deutsche Telekom owns just over half of T-Mobile US, a stake worth roughly €90 billion. For context, the entire Bonn-based group has a market capitalisation of around €132 billion. That means the US business accounts for the lion’s share of the parent company’s value — a fact that has not been lost on investors.

Strike action bites at home

The contrast with the domestic picture could hardly be starker. Verdi has been staging walkouts since late April across several German states, including Bavaria, Baden-Württemberg and Hesse. The union is demanding a 6.6% pay rise plus a fixed bonus for members. Early signs of disruption are already emerging, with delays in customer service and the fibre-optic expansion programme.

Deutsche Telekom has been pressing ahead with its infrastructure build-out regardless. In March alone, the company connected 170,000 new fibre households and is targeting an annual run rate of around 2.5 million. But the labour unrest threatens to slow that momentum.

What to watch on May 13

All eyes are now on May 13, when Deutsche Telekom publishes its own first-quarter results. Analysts expect full-year earnings per share of €2.19, while the dividend is forecast to rise to €1.14 from €1.00 last year. The management has set a target for adjusted operating profit of around €47.4 billion for the full year.

The numbers from T-Mobile US have provided a welcome tailwind, but the real test will be whether the group can convince the market that the operational momentum outweighs the drag from the labour dispute. For now, the shares are treading water — supported by the US engine, but weighed down by the German storm.