Deutsche Telekom reports narrower loss of €3 million in fourth quarter despite Greek costs

By Matt Moore, AP
Thursday, February 25, 2010

Deutsche Telekom loss narrows despite Greek costs

BERLIN — Deutsche Telekom narrowed its fourth quarter loss to euro3 million ($4.1 million) after gaining more U.S. cell phone subscribers and slowing the loss of traditional land line users in its home country.

The financial crisis in Greece, however, cost its operations there euro500 million.

The German provider of high-speed Internet access and home and cell phone service said the quarterly loss compared with a euro730 million loss a year earlier, when the global credit crunch was most intense.

In the U.S., the company said its T-Mobile unit saw a slip in revenue, but the number of subscribers was on the rise and its high-speed network was being increased.

Revenue was up more than half a percent in the final three months of 2009 to euro16.2 billion, reflecting improvement in its critical home market. The figure compared with euro16.1 billion a year earlier.

The company was hurt, however, by the ongoing financial turbulence in Greece through its acquisition of Hellenic Telecommunications Organization SA, or OTE, in 2008.

The acquisition of OTE helped contribute some euro5.4 billion in revenue to Telekom’s figures and euro2 billion in pretax profit, but a drop in value forced Deutsche Telekom to take a write-down on the overall value of its 30 percent stake in the company.

For the year, the company earned euro353 million in net profit, down 76 percent from nearly euro1.5 billion in 2008. Revenue rose 5 percent to euro64.6 billion compared with euro61.6 billion the year before.

“After a bumpy start, we rounded 2009 off with good results,” said Chief Executive Rene Obermann. “Cost discipline was key to getting through economically challenging times. However, we did not save at the expense of the future, but continued to invest heavily.”

Still, the company said it planned to continue cutting costs with the goal of reaching euro4.2 billion in reductions by the end of 2012.

It also cut its pretax profit estimate for this year to around euro20 billion from nearly euro20.7 billion.

Telekom shares were down 1 percent to euro9.42 in Frankfurt trading.

Late Wednesday, the company committed itself to paying dividends from this year through 2012, and proposed a dividend of 78 euro cents a share for 2009. From this year to 2012 it said it planned to pay at least a 70 euro cent per share dividend and pledged a euro3.4 billion share buyback program.

Telekom said that, for the year, Germany showed good gains even as revenue declined 3.7 percent to euro25.4 billion, because more customers signed up for its high-speed DSL service and more consumers gravitated toward its television over the Internet products.

Continuing decline in its fixed-line business decline was offset by growth at its German T-Mobile cell phone unit. Annual revenue was up half a percent to euro8.1 billion.

By the end of 2009, Telekom counted 17.2 million contract subscribers, up 1.1 percent from 2008.

In the United States, T-Mobile USA remained under intense pressure from rivals, including Verizon, AT&T and Sprint. Revenue for the year fell 1.6 percent to $21.5 billion and its pretax profit slipped 4.5 percent to euro5.9 billion.

However, customer numbers increased by 1 million to 33.8 million, lifted by 371,000 new accounts in the fourth quarter.

Telekom said its third-generation network in the U.S. now covered a population of 205 million and the entire network had been upgraded to support data transmission of 7.2 megabits per second.

In Europe, T-Mobile remained strong save for its British unit, T-Mobile UK and problems related to the Greek financial crisis.

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