Deutsche Telekom earnings highlight iPhone effect

Deutsche Telekom earnings highlight iPhone effect
Photo: DPA
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 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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