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Business

Deutsche Telekom's Profits Rise Despite Defecting Customers

Deutsche Telekom lost 120,000 fixed-line customers in the first three months of 2008, the company announced on Thursday, May 8. It predicted it would lose as many as 1.1 million before the year was over.

A woman makes a telephone call from her apartment

"Hello, Deutsche Telekom? I'd like to cancel my fixed line connection"

In more bad news for Telekom, sales slipped 3.1 percent to 15 billion euros ($23 billion), missing analyst estimates. The company's revenue narrowly missed the median estimate of 15.1 billion euros forecast by 10 analysts.

The company attributed the drop to the defection of the fixed-line customers and the slump of the US dollar against the euro.

However, there were reasons to be cheerful. Net income rose to 924 million euros from 459 million euros a year earlier, mainly due to cost-cutting and restructuring measures. The net income figure beat the 636 million euros analysts were expecting. Adjusted earnings before interest, taxes, depreciation and amortization were unchanged from the previous year at 4.7 billion euros.

The telecommunications giant expected adjusted earnings before interest, tax, depreciation and amortization to reach about 19.3 billion euros this year and free cash flow of 6.6 billion euros for the company as a whole.

"We've laid a good basis for the rest of the year in these three months,'' Chief Executive Rene Obermann told the press.

Restructuring and cost-cutting

Deutsche Telekom CEO Rene Obermann

Telekom CEO Obermann sees a silver lining

Telekom sold its media and broadcast unit to TDF of France in January and in March agreed to buy 20 percent of Greece's Hellenic Telecommunications Organization for 2.5 billion euros.

The sale of the media and broadcast unit was valued at about 850 million euros. Chief Financial Officer Karl-Gerhard Eick told reporters on Thursday that the company booked a gain of about 500 million euros from the sale.

This and other factors helped Deutsche Telekom to cut net debt by 6 percent to 37.2 billion euros last year.

In early trading on the Frankfurt Stock Exchange, Telekom shares fell 6 cents, or 0.5 percent, to 11.46 euros. Telekom shares have fallen 24 percent in total so far this year.

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