Deutsche Telekom, Telefónica report lower sales in Q1

Two of Europe's largest operators reported lower sales in the first quarter of 2013, reflecting the weak European economy and fierce competition in their respective home markets.

According to Reuters, Telefónica reported an 11.7 per cent drop in revenue to €6.7 billion ($8.8 billion) for its European operations in the first quarter, with total revenue down 9 per cent at €14.1 billion. Deutsche Telekom, meanwhile, said revenue in Europe shrank 6.9 per cent to €3.33 billion, while overall revenue fell 4.5 per cent to €13.8 billion.

Despite the fall in sales, both Deutsche Telekom and Telefónica were able to record higher profits. Deutsche Telekom said net profit rose 3.5 per cent to €564 million, while Telefónica said quarterly profits rose 21 per cent to €902 million year-over-year, a rebound from 2012 when it wrote down its stake in Telecom Italia, according to BBC News.

Nonetheless, underlying conditions remain tough in Europe due to cuts in mobile termination and roaming rates, ongoing recessions and flat growth in many markets, as well as fierce price wars.

The two operators face particularly difficult conditions in their home markets, with Spain still in recession and Germany engulfed in a mobile turf war.

Reuters reported that Telefónica's Spanish revenue fell 16 per cent to €3.3 billion, although margins continued to improve.

In Germany, Deutsche Telekom and its rivals are introducing new mobile price plans in a bid to retain and attract new subscribers. In a statement, the German operator said mobile service revenue declined 0.1 per cent during the quarter.

"This was the best figure since the fourth quarter of 2011 and underlines the progress Deutsche Telekom has made compared with the competition," the company added.

Deutsche Telekom's management is now expected to be able to focus more on the European operations after the operator's U.S. unit, T-Mobile USA, completed its merger with flat-rate player MetroPCS, according to Bloomberg.

Separately, other European units of Deutsche Telekom also reported mixed results for the first quarter. Reuters reported that Hungary's Magyar Telekom suffered a sharp decline in first-quarter profits to €5.78 million from €44 million a year earlier due to government measures that raised costs. OTE in Greece, meanwhile, reported higher-than-expected profits of €167.5 million ($219.2 million) due to a tax gain, although sales were down by 11 per cent.

For more:
- see this Reuters article
- see this BBC News article
- see this Bloomberg article
- see this separate Reuters article
- see this third Reuters article

Related Articles:
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Deutsche Telekom slashes dividend, puts focus on German LTE deployment
Deutsche Telekom pushes for scale with T-Mobile/MetroPCS merger
Report: Telefónica considers Colombia IPO to reduce debt
Telefónica UK offloads broadband business to BSkyB for £180M
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