Deutsche Telekom earnings highlight iPhone effect

German telecommunications operator Deutsche Telekom disappointed investors with third-quarter results on Thursday, and spotlighted the impact on earnings of smartphones such as Apple's iPhone.

Deutsche Telekom earnings highlight iPhone effect
Photo: DPA

Deutsche Telekom reaffirmed its underlying operating profit target for 2010 thanks in part to stronger domestic revenues and reported a 7.9-percent rise in quarterly net profit to €1.035 billion ($1.46 billion).

The group said it would make an adjusted core operating profit of €20 billion for the year as a whole, but its shares fell sharply in midday trading.

Third quarter sales fell by 4.1 percent on a 12-month comparison to €15.6 billion after results from the British mobile telecoms unit were stripped out, having been merged with one owned by France Telecom.

The German group also noted that adjusted core earnings lost 14.8 percent to $1.3 billion in the United States, where its T-Mobile USA unit does not offer the popular iPhone, in contrast with rival AT&T.

Chief executive Rene Obermann told a telephone conference that he “did not foresee a partnership with Apple in the near term” in the US.

In Germany, Deutsche Telekom sold a record 400,000 of those phones in the third quarter, but will soon face competition from rivals Vodafone and O2 as they begin to offer the devices as well.

The group’s domestic sales were boosted by the growing number of smartphones which incite users to use more telecoms services. Its results were in line or slightly better than expected by analysts.

Those polled by Dow Jones Newswires forecast a quarterly profit of €913 million and €15.57 billion in sales.

Deutsche Telekom’s adjusted core earnings before interest, tax, depreciation and amortisation (Ebitda), which the company uses in forecasts, fell by 9.02 percent to €5.02 billion.

That was also a result of the economic environment in south-eastern Europe, where the operator is strongly active and high marketing costs are required to stay competitive in the United States, a statement said.

Deutsche Telekom nonetheless reaffirmed its full year adjusted Ebitda target of €20 billion and available cash flow position of at least €6.2 billion.

“Our forecasts stand. And that is the basis for our dividend,” Obermann said. He stressed that the cash-flow forecast was “a minimum” and thus represented “a more optimistic tone.”

However, shares in the company plummeted by 2.06 percent to €10.24 in midday trading on the Frankfurt stock exchange, while the DAX index of leading stocks was 1.56 percent higher overall.


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Hundreds of German banks make Apple Pay service available for first time

Together with some German banks, Apple is pushing for a change in Germany’s cash-loving culture by making contactless payment via mobile phones more accessible to users.

Hundreds of German banks make Apple Pay service available for first time
Photo: DPA

It’s been a year since the launch of Apple Pay in Germany, and significantly more consumers are now able to use the mobile payment service than ever before. 

READ ALSO: Apple Pay finally launches in cash-loving Germany

On Tuesday, 371 out of a a total of 379 Germans savings banks made the service available for a total of 50 million customers.

Commerzbank, Norisbank, and LBBW (Landesbank Baden-Württemberg) are among the banks now offering the use of the service to their clients.

Integration of popular girocard system still in the works 

As is typical for German banks, only credit cards and debit cards issued by the banks themselves can be integrated into the service.

A system which uses the very popular girocard, previously known as the EC card, is still in the works. This interbank network and debit card service connects virtually all German ATMs and banks. 

The logo of the popular girocard brand, formerly know as EC-Karte. Photo: DPA.

Jennifer Bailey, the head of Apple Pay, said that the service will be integrated into the girocard system in the coming year. 

Extra security 

Apple Pay allows customers to pay using the iPhone or Apple Watch as if they were using a contactless card. The payment method also applies for internet purchases. 

Users are able to unlock and approve the transactions through face identification or fingerprint scanning technology. Bailey emphasized that this technology ensures that the fraud rate is virtually zero with Apple Pay. 

Contactless payment at the cash register relies on the NFC chip technology. NFC stands for “near-field communication,” and works by allowing various devices equipped with the technology to exchange data. Apple's Jennifer Bailey gives a presentation about Apple Pay in Cupertino, CA earlier this year. Photo: DPA. 


It is especially secure due to the fact that communication between devices is only possible within about 10 centimeters. 

The banks can only access the NFC via use of Apple Pay, due to Apple’s possession of the special high-security chip within their devices called the “Secure Element.”

German regulation challenges Apple’s dominance 

Germany passed a law in late November that requires platform operators such as Apple to provide financial services, such as banks who use their technology, full access to the infrastructure, such as the NFC, which makes the system work in exchange for a small fee. 

The law ensures that Apple’s rivals in the mobile payment market would still have access to the technology that makes it work. 

The regulation is just one part of recent actions in Germany to regulate US technology companies and their market dominance. 

Commerzbank was one of the banks to adopt the Apple Pay service recently. Photo: DPA.

Apple criticized the law but feels confident overall about accommodating it from a legal perspective. The company emphasized that it already provides access to the NFC chip infrastructure to financial service providers, thus meeting the requirements of the law. 

“When a card is added to the Apple Wallet, banks can decide whether to use it to trigger secure payments from their own apps via NFC. No new law is necessary for that,” the statement said. 

Banks ‘voting with their actions’ 

“Banks are voting with their actions by working with us on Apple Pay,” Bailey said of the bill, in regards to the latest additions and the development of a girocard solution. Apple’s system is still the safest way to pay with the iPhone. 

“The only way to the NFC chip today is via Apple Pay,” Bailey said, expressing concern that any other system would jeopardize user data and security. 

Translated by Kate Brady.