Deutsche Telekom doubles third-quarter profit

Deutsche Telekom, Europe's largest telecommunications operator, expects 2004 net profit to be higher than forecasted and said its...

Deutsche Telekom, Europe's largest telecommunications operator, expects 2004 net profit to be higher than forecasted and said its third-quarter profit has more than doubled, spurred by growth in its mobile and internet operations.

Third-quarter net income rose to €1.4bn (£978m) from €508m in the same period the year before, the company said.

Deutsche Telekom said net income will more than double to €3.2bn in 2004 from €1.3bn, up from its original target of €2.5bn.

Net revenue for in the third-quarter increased to €14.5bn from €14.1bn the same quarter of last year.

Under chief executive officer Kai-Uwe Ricke, Deutsche Telekom has seen its revenue grow faster than many of its European rivals thanks largely to its US mobile subsidiary, T-Mobile USA, which the German operator said was buoyed by continued subscriber growth.

In the first nine months of this year, T-Mobile USA added 3.2 million customers, of whom 900,000 were in the third quarter. The US unit's customer base is now around 16.3 million, Ricke said.

The company's wireless arm as a whole, T-Mobile International, increased revenue by 9.4% to €6.5bn, with earnings before interest, taxes, depreciation and amortisation (EBITDA) - adjusted for special items - rising 24% to €2.2bn.

The division added 6.2 million customers in the past three quarters, bringing its total customer base to 73.4 million. It is currently developing a programme to reduce subsidies on mobile phones in a move to lower costs by about €1bn by 2006, Ricke said.

Deutsche Telekom is reorganising its operations into three major areas: broadband and fixed network; mobile communications; and business customers.

For the business customer segment, the reorganisation involves merging operations that belonged to the carrier's separate internet subsidiary, T-Online International, and its fixed-line unit, T-Com.

Under the planned merger, T-Online will remain a separate organisation responsible for developing IP (Internet Protocol) services and applications, while T-Com will focus on network management, integrated platforms and the development of open standards, in addition to providing circuit-switched telephone service.

Two new business customer units will be launched next year, with a core focus on broadband telecommunications and IT networking services. The T-Systems Enterprise Services unit will serve around 60 multinational businesses, while the T-Systems Business Services unit will target approximately 160,000 large and medium-sized enterprises.

With an eye to the residential market, Deutsche Telekom plans to launch a range of convergence products based on its "triple-play" strategy, which combines telephony, high-speed internet and TV via a broadband connection. In the process, the operator aims to increases its average revenue per user to counter the decline in traditional circuit-switched telephone calls.

Calling revenue was down 13.5% in the third quarter, a slight improvement over the 15% decrease in the two previous quarters, according to chief financial officer Karl-Gerhard Eick.

At the end of the third quarter, Deutsche Telekom's net debt was less than €40.8bn, down €6bn since the end of 2003.

At the end of October, Deutsche Telekom cut net debt to slightly less than €40bn - the first time in nearly five years that the group's net debt dropped below this figure, Eick said.

Ricke's predecessor, Ron Sommer, invested more than €70bn on international expansion that let to a loss of nearly €25bn in 2002, the largest ever by a European company.

John Blau writes for IDG News Service

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