Deutsche Telekom's profit dives in Q4, turnaround promised in 2012

The management of Deutsche Telekom has revealed that the company lost €582 million during its fourth quarter, blaming the loss on the economic crisis and increases in government taxes.

However, the firm was able to post a very slight increase (0.4 per cent) in year-over-year net revenue of €62.4 billion, and an adjusted net profit of €3.4 billion, a figure on par with 2009.

But the German company doesn't see much improvement during 2011, and is predicting that European sales will decline again this year. The company said that the decline should slow during 2012, while adjusted EBITDA would remain stable.

"We're seeing a stabilisation of the economies in Eastern Europe," CFO Timotheus Hoettges said at a press briefing, according to Bloomberg. Hoettges was alluding to past trading problems in Greece and Romania, but added that business was improving in other countries such as Poland and the Netherlands.

Commenting on its home market, Hoettges said that mobile revenues rose 5 per cent in the fourth quarter, driven by a growth in data revenue of 28 per cent. For the year, the company saw its mobile data revenue increase by 36 per cent to €1.3 billion.

"Despite the loss of iPhone exclusivity, we maintained very strong iPhone sales with almost 350,000 iPhones sold in the fourth quarter alone," Hoettges told Bloomberg. Of note, the company also sold around 50,000 Windows Phone 7 smartphones during 2010.

But the firm still struggles to compete effectively in the United States where it lost nearly 320,000 postpaid customers in the fourth quarter.

"What Deutsche Telekom does in the U.S. is the key issue", said Michael Kovacocy, European telecoms analyst at Evolution Securities. Speaking to the Financial Times, Kovacocy said, "It is not a core market for them and they are not in the top two providers, they are fourth. They have the wrong structure, the wrong customers and the wrong spectrum. Given these problems, and given that they will struggle to break into the top two, at some point it might make sense for them to think about exiting the US."

Summing up the results, Deutsche Telekom's CEO, Rene Obermann, said: "We delivered solid figures in 2010. We have battled through the headwind caused by the economic environment, special taxes in several countries, and stiff competition. I am particularly pleased about the slight increase in revenue."

For more:
- see this Bloomberg article
- see this Financial Times article
- see this Mobile News article

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