Deutsche Telekom posts better Q2, but remains downbeat on Europe

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Deutsche Telekom confirmed it is on track to reach its full-year targets after it posted earnings in the second quarter that beat expectations, but the German operator warned that its European business is not likely to improve in the near term.

According to Dow Jones Newswires, net profits rose to €614 million in the second quarter from €348 million a year earlier after the company benefited from a drop in one-off net costs of around two thirds to €200 million. Revenue declined slightly by 0.7 per cent to €14.38 billion. The company has reduced costs and jobs in its German and U.S. markets.

The operator's European markets are struggling with a severe economic downturn as well as changing user behaviour in areas such as mobile phone usage, with consumers switching to IP-based applications and social networking platforms.

DT reported that EBITDA fell 8.8 per cent per cent in the period to €1.2 billion in Europe, excluding Germany. In Germany, where the company has been cutting thousands of jobs, operating profit dropped 2.2 per cent to €2.36 billion in the second quarter.

"With further deterioration in the economic situation of many countries, intense competitive pressure, and regulatory intervention, revenue and earnings [in the Europe division] still suffered," Dow Jones quoted Deutsche Telekom as saying in a statement.

The Financial Times noted that the company's mobile business performed better than its fixed business in the second quarter: fixed revenues declined 4.1 per cent in the period and mobile service revenue fell 1 per cent compared with the previous year.

German mobile operations "should also pick up" with more LTE devices coming on sale later this year, the FT quoted analysts at Sanford Bernstein as saying.

Deutsche Telekom was also boosted by its U.S. mobile unit, T-Mobile USA, which increased operating profits by 19 per cent to €1.06 billion, helped by lower handset subsidies and a stronger dollar against the euro, according to Dow Jones. However, T-Mobile USA continued to bleed postpaid subscribers in the second quarter.

For more:
- see this Reuters article
- see this FT article (sub. req.)
- see this Dow Jones Newswires article

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