Telekom posts loss

April 24, 2001
Web posted at: 1051 GMT

LONDON (CNN) -- Deutsche Telekom said on Tuesday it made a loss in the first three months of 2001 after spending billions on acquiring mobile phone licenses.

Europe's biggest fixed-line phone company sunk to a net loss of 400 million ($359 million), including amortization of goodwill and costs related to developing high-speed mobile networks, compared to a profit a year ago.

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Deutsche Telekom spent more $60 billion last year on acquiring high-speed, or third-generation, mobile licences -- in the UK, Germany, the Netherlands and Austria – and buying VoiceStream Wireless in the U.S.

The German company, which faces a possible credit rating downgrade on its mounting debts from credit agency Moody's Investors Service, has debts of about 57 million. The company has now shifted its focus from gaining new mobile phone customers to improving margins at it cellular unit.

Ron Sommer, chief executive of Deutsche Telekom, told CNN that the company had invested "wisely" in acquiring high-speed mobile phone permits and assets and is moving on to the next stage of its strategy of improving earnings.

Sommer said the company would reduce its debt and had sold non-essential assets worth 10 billion last year and "expects to sell between 10-14 billion this year". He said that figure did not include the proposed initial public offering of its mobile phone unit T-Mobile.

Telekom said the "first quarter confirms growth expectations and improvement in operating results in the double-digit area for the 2001 financial year."

That double-digit growth in earnings before interest, tax, depreciation and amortisation - a measure of the financial performance of a company that is heavily in debt - in 2001 is expected mainly from improvement at cellular unit T-Mobile International.

T-Mobile's EBITDA rose to 590 million in the three months to March 31 from 350 million a year ago.

Sommer said the company was developing "exciting new data services for businesses and individuals." Currently 10 percent of revenue comes from data services, he said.

Net profit excluding goodwill and third-generation mobile costs rose more than 18 percent to 450 million. First-quarter sales rose 16 percent to 11.1 billion.

"The outlook that we received today is positive," Werner Staeblein, telecoms analyst at BHF Bank who has a "buy" recommendation on Telekom, told Reuters. "This is something that gives you a little bit more security."

Telekom's share price has fallen more than 70 percent since last March amid concerns revenue from faster mobile phone services would take some years to come through and uncertainty over its acquisition of VoiceStream.

Telekom shares were last trading up 2.7 percent in Frankfurt at 29.59.  

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Deutsche Telekom

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