Deutsche Telekom earnings nosedive

Deutsche Telekom AG, Europe's largest telephone company, reported an unexpected fourth-quarter loss on additional costs to cut jobs.

The net loss was 757 million euros, compared with an 898 million-euro loss a year earlier, Deutsche Telekom said in a statement yesterday. Sales slipped 0.6 percent to 15.8 billion euros.

Chief Executive Officer Rene Obermann is in the midst of cutting 32,000 jobs as Deutsche Telekom loses fixed-line clients in Germany and faces price cuts in the United States by AT&T Inc and Verizon Communications Inc. Deutsche Telekom took a 1.4 billion-euro charge related to its job-cut program in the quarter.

"The fixed-line business in Germany remains the biggest issue as the line loss will continue," said Ulrich Trabert of Bankhaus Metzler in Frankfurt, who has a "buy" rating on Deutsche Telekom shares, via phone. "All in all the numbers are in line, but the personnel charge is the surprise."

Profit had been predicted at 665 million euros on revenue of 15.9 billion euros, the median estimates of 12 analysts Bloomberg surveyed via phone and e-mail.

Fourth-quarter net income, excluding gains and losses, fell 1.9 percent to 808 million euros, beating the 764 million-euro average estimate in the survey. In the year-earlier quarter, Deutsche Telekom had one-time costs of 1.7 billion euros, mostly from job cuts.

2008 forecast

Deutsche Telekom yesterday forecast that earnings before interest, taxes, depreciation and amortization, excluding some items, will be around 19.3 billion euros this year, little changed from 2007, reiterating its Nov 8 prediction that the measure will remain "stable" in 2008.

Obermann, 44, sold assets including French and Spanish Internet units, pushed through pay cuts for 50,000 fixed-line workers and expanded T-Mobile with takeovers in the Netherlands and the US. He is seeking to complete two programs, started by predecessor Kai-Uwe Ricke, to cut 32,000 jobs by this year, and lower annual costs by as much as 4.7 billion euros by 2010.

Deutsche Telekom said yesterday it lowered its cost base by 2.3 billion euros in 2007, exceeding its plan for a reduction of 2 billion euros for the year.

On Wednesday, Deutsche Telekom proposed Henkel KGaA CEO Ulrich Lehner to become chairman of its supervisory board, filling a position left vacant by Klaus Zumwinkel. Zumwinkel quit the job, along with his CEO position at Deutsche Post AG, on Feb 15 after German prosecutors said he was being investigated for possible tax evasion. Shareholders will vote on the appointment May 15.

Deutsche Telekom lost 2.1 million fixed phone connections in Germany last year, including 537,000 lines in the final quarter. Obermann said on Jan 28 that line losses will continue as more consumers make calls exclusively on mobile phones.

T-Mobile, Deutsche Telekom's largest division by revenue, added 12 million users last year, including 7 million outside Germany, for a total of 120 million clients. T-Mobile sells services in 11 European countries and the US.

In the US, where four out of five people have a mobile phone, T-Mobile, the fourth-largest US wireless company, introduced monthly packages this month with unlimited calls and text-messaging for $99.99, following AT&T and Verizon's offers. Revenue growth at T-Mobile USA was hurt by the dollar's drop against the euro.

Agencies

(China Daily 02/29/2008 page16)