Deutsche Telekom said it was on track to meet its targets after the group's second quarter profit was hit by restructuring charges mainly for staff in Germany.
Domestic operations in Germany -- soon to account for 54 percent of Deutsche Telekom's business -- have gained in importance since the company decided to sell its U.S. business to AT&T in March.
The Bonn-based group said net profit dropped 26.7 percent to 348 million euros ($495.9 million) mainly due to 600 million euros in one-time expenses for an extended early retirement plan for staff.
Apart from Germany, Deutsche Telekom is also active in Southeastern Europe and owns a 40 percent stake in Greek telecom group OTE.
It said business at its European operations was improving although the economic situation in Greece and Romania remained difficult.
We are now also seeing light at the end of the tunnel in Southeastern Europe, Chief Executive Rene Obermann said in a statement.
Second quarter earnings before interest, tax, depreciation and amortization (EBITDA) dropped 6.5 percent to 4.687 billion euros ($6.68 billion), the company said.
Group sales were down 6.8 percent at 14.475 billion euros.
Analysts polled by Reuters estimated a net profit of 635 million euros, a core profit of 4.67 billion and sales of 14.69 billion euros.
Although these figures are not a cause for celebration, they still give us reason to be confident that we will achieve our targets in a persistently difficult environment, Obermann said.
The Bonn-based group expects a full year core profit of 19.1 billion euros and a free cash flow of at least 6.5 billion euros.
(Reporting by Nicola Leske)