Deutsche Telekom profits soar despite revenue drop

FRANKFURT, Germany (AP) -- Europe's biggest telecom company Deutsche Telekom said Thursday that its first-quarter profit rose more than 33 percent as it reaped the benefit of selling its media and broadcast unit and booked lower interest expenses.

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 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 ($1.43 billion) in the quarter, compared with €459 million a year earlier.

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

Shares of Deutsche Telekom were down 0.26 percent to €11.49 ($17.73) 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 ($7.7 billion), compared with €4.94 billion a year earlier. In the United States, revenue slipped slightly to €3.461 billion ($5.34 billion), compared with €3.468 billion 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 ($7.23 billion) in the quarter, on par with last year's figure of €4.682 billion.

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