Deutsche Telekom First Half Profits Up 3 Percent to $1.05 Billion

1:24 AM PST 08/09/2012 by Scott Roxborough

Costs at T-Mobile USA continue to weigh on German telco group.

Deutsche Telekom boosted profits and held revenues steady in the first half despite ongoing problems with its U.S. mobile division T-Mobile USA and intense competition in the German market with Vodafone.

The German telco giant booked net revenues of $35.6 billion (€28.8 billion) in the first six months of this year, down 0.9 percent. Net profits were up slightly at $1.05 billion (€852 million).

"We are keeping our word and providing a good deal of reliability to the market with very solid figures," said Deutsche Telekom CEO Rene Obermann. "We do of course continue to face a number of challenges, but we are performing very respectably compared with our competitors."

In Germany, operating profits (EBIT) were up 41.3 percent in Q2 to $1.45 billion (€1.17 billion). There was strong growth in Telekom's IPTV service Entertain, which increased subscriber figures by 40.7 percent to 1.8 million. Mobile data revenue was also up, driven by smartphone and tablet use, posting a 19 percent increase to $599 million (€484 million) for Q2. Telekom's fixed line business, however, continues to slide and overall quarterly revenue was down more than 3 percent to $6.9 billion (€5.6 billion) in the territory.

Deutsche Telekom has joined the bidding for cable group PrimaCom, reportedly putting in an offer of just under $350 million for the group, which serves some 1 million cable subscribers in and around Berlin. If the bid is successful, it would mark Telekom's return to the lucrative German cable TV market, a business the former national monopolist was forced to exit following its privatization in 1995.

The American market remains a difficult one for Deutsche Telekom. Write-offs connected to Telekom's planned $39 billion sale of T-Mobile USA to AT&T, which was rejected by competition authorities, hit adjusted net profit figures in the second quarter, which dropped 13.9 percent to $1 billion (€819 million). T-Mobile also lost a total of 205,000 customers in Q2, with more than half a million long-term contract customers signing off. This drop was somewhat compensated for by an increase in prepaid customers.

For the full year, Deutsche Telekom is holding to its forecast of operating profits (EBITDA) of around $22.3 billion (€18 billion) and free cash flow of some $7.4 billion (€6 billion).

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