Telekom reports rise in 1Q profits on sales, lower costs

The Bonn-based provider of landline, mobile phones and Internet access earned 750 million euros ($1.16 billion) in the January-March period, up 33.2 percent from the 563 million euros it earned a year earlier. The figure included adjustments for special effects along with gains from the divestment of its media unit to France's TDF SA in January.

Without those adjustments, the company earned 924 million euros ($1.43 billion) in the quarter, compared with 459 million euros a year earlier.

Despite the increases, company revenue slipped 3.1 percent to about 15 billion euros ($23.14 billion) in the first three months of 2008, compared with 15.5 euros a year ago, and below the 15.1 billion euros ($23.3 billion) that analysts polled by Dow Jones Newswires had forecast.

Shares of Deutsche Telekom fell 2 percent to 11.75 euros ($18.17) in Frankfurt trading.

"The business customers segment is mainly to blame here with the largest shortfall from expectations," UniCredit analyst Thomas Friedrich said.

Deutsche Telekom chief executive Rene Obermann pinned the lower sales on the company's broadband and fixed network and business segments, and also the strong euro, which hit a record $1.6018 last month.

Telekom's T-Mobile USA does its business in dollars and the unit posted a slight drop in sales in the first quarter.

The company said the number of landline users slipped 6.3 percent to 35.9 million customers at the end of March, compared with 38.3 million last year. That decline was offset, however, by an 18 percent increase in the number of broadband subscribers, which rose to 14.4 million in the quarter, compared with 12.2 million a year earlier.

The number of mobile phone customers rose 9.5 percent to 123.1 million from 112.4 million, with customer growth in the U.S. up 13.5 percent and in Europe by 8.3 percent.

In Europe, revenue from mobile customers was up 1 percent to 4.99 billion euros ($7.7 billion), compared with 4.94 billion euros a year earlier. In the U.S., revenue slipped slightly to 3.461 billion euros ($5.34 billion), compared with 3.468 billion euros a year earlier, even as the number of subscribers at T-Mobile USA rose by 3.4 million to 30.8 million, compared with 27.1 million a year earlier.

In spite of the decrease, the company said that of its total revenue figures, 51.6 percent of its sales came from outside Germany, a good sign for its international expansion.

Deutsche Telekom's closely watched earnings before interest and taxes, used by analysts as a barometer of its operation performance, was 4.686 billion euros ($7.23 billion) in the quarter, on par with last year's figure of 4.682 billion euros.

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