Deutsche Telekom Q2 net falls 27 percent

August 4, 2011 - 4:15 AM

FRANKFURT, Germany (AP) — Deutsche Telekom AG said Thursday net profit fell 27 percent in the second quarter as it took one-time charges for early retirements in Germany and faced lagging revenue and excessive customer turnover in the U.S. mobile business it is selling to AT&T.

Net profit fell to euro348 million ($496 million) from euro475 million in the same quarter a year ago. Revenues were off 7 percent to euro14.5 billion.

Profit figures were well short of the euro679 million average analyst estimate compiled by FactSet. Company shares traded up 0.2 percent at euro10.27.

CEO Rene Obermann said a statement that "these figures are not a cause for celebration" but said the company "will achieve our targets in a persistently difficult environment."

The company took around euro600 million in one-time charges, including a program to have employees who still have civil servant status at the former state phone company to take early retirement by the end of the year. The company said it would spend some euro700 million on that program over the next six or seven years.

As a positive, the company pointed to the 13 percent growth in mobile Internet revenue, which it credited to the increasing share of the mobile phone market held by Internet-capable smartphones. The company confirmed its target for the year of operating earnings from continuing operations excluding financial items of euro14.9 billion.

Other woes across the company's regions hurt earnings. The economic crisis in Greece has affected the local OTE phone company, in which Telekom has raised its stake to 40 percent, and revenues slipped in Romania, Hungary and Croatia. In Germany, revenue fell 3 percent as broadband and other business failed to make up for the well-established trend of people abandoning landlines.

A weaker dollar shrunk U.S. revenues when translated into euros, and customer turnover remained too high at the T-Mobile USA operation. U.S. revenues were off 16 percent to euro3.51 billion.

Deutsche Telekom is in the process of selling T-Mobile USA to AT&T Inc. for $39 billion but the sale is being held up by lengthy anti-trust review.