Telekom sees sales improving

Sommer: Sales to increase 10 percent this year

BONN, Germany (CNN) -- Deutsche Telekom said on Tuesday earnings would improve this year as sales picked up.

The debt-laden telecom giant, which posted a net loss of 3.45 billion euros ($3.1 billion) in 2001, said revenue growth in its mobile phone operations would help return the group to profitability.

"We have quite a positive outlook for this year and the years to come," Chief Executive Ron Sommer told CNN. " We are producing a positive cash flow."

Group earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by a single-digit percentage point in the first quarter from a year earlier, without giving specific numbers.

Sales rose 16 percent to 12.9 billion euros ($11.48 billion) in the first three months of the year. Revenues for all of 2002 are expected to increase by 10 percent, Sommer said.

The group said its mobile unit T-Mobile doubled EBITDA -- a measure of profitability for debt laden companies -- in the first quarter to 1.2 billion euros, on revenues to 4.5 billion, while the group's U.S. wireless operator Voicestream posted an EBITDA of 106 million euros.

Deutsche Telekom is under pressure from investors to slash its 62.1 billion euro ($54.43 billion) debt load.

As part of its debt-reduction strategy, the group plans to float T-Mobile. However, the initial public offering has been delayed indefinitely due to weak market conditions.

The flotation, which is expected to raise 10 billion ($8.69 billion), has been key to helping the German telecom giant meet its commitment to cut its debt to 50 billion euros by the end of 2003.

Deutsche Telekom's debt reduction plan also includes the sale of its cable television assets.

A 5.5 billion euro bid by Liberty Media of the U.S. was blocked in March by German regulators after Liberty rejected a demand that it upgrade the cable networks faster than originally planned.

In addition, the group is selling non-strategic assets to pay down its debt. In the past two years, it has sold 20 billion euros in assets.

Deutsche Telekom, along with other European telecom groups, built up debt in the past three years through global expansion and massive spending on licences to operate high-speed third-generation (3G) services.

But many have delayed the introduction of 3G services while they attempt to pay off their debt amid a global economic slowdown.

Deutsche Telekom shares were down 0.8 percent to 16.56 euros in midday trading on Tuesday in Frankfurt.