-- Deutsche Telekom confirms full-year guidance
-- Second-quarter net profit up on lower restructuring costs
-- Europe posts declines, while U.S. profit rises
-- Company maintains dividend plan
(Rewrites throughout)
By Philipp Grontzki
Deutsche Telekom AG (DTE.XE) Thursday confirmed it's on track to
reach its full-year targets after second-quarter net profit rose
sharply, helped by lower expenses linked to staff reductions, but
the company warned its European business is unlikely to improve in
the near term.
Net profit rose to 614 million euros ($759.7 million) in the
three months to June 30 from EUR348 million a year earlier,
benefiting from a drop in one-off net costs of around two thirds to
EUR200 million, the company said. Revenue was EUR14.38 billion,
down 0.7% from EUR14.48 billion.
Like other European operators, Deutsche Telekom has been
fighting with eroding prices and falling revenue due to intense
competition as well as heavy regulation. Tough economic conditions
in southeastern Europe where it has a large footprint through its
40% stake in Greece's Hellenic Telecommunications Organization SA
(HTO.AT) have also been taking their toll.
Earnings before interest, taxes, depreciation, amortization and
one-time items such as restructuring costs fell 8.8% in the period
to EUR1.2 billion in Europe, excluding Germany. In Germany, where
the company has been cutting thousands of jobs in past years to
bring costs down, operating profit dropped 2.2% to EUR2.36 billion
in the second quarter.
"With further deterioration in the economic situation of many
countries, intense competitive pressure, and regulatory
intervention, revenue and earnings [in the Europe division] still
suffered," Deutsche Telekom said in a statement.
Another weak spot for the company has been its ailing U.S. unit
T-Mobile USA, the nation's fourth-biggest wireless carrier, which
was late in upgrading its network. It lost another net 557,000
branded contract customers in the second quarter but still managed
a 19% increase in operating profit to EUR1.06 billion, helped by
lower expenses for handset subsidies and a stronger dollar against
the euro. In local currency, adjusted Ebitda was up only 5.8%.
Deutsche Telekom has repeatedly said that it continues to
explore strategic options for T-Mobile USA after a plan to sell it
to AT&T Inc. (T) failed last year on opposition from
regulators. However, Chief Executive Rene Obermann said in May that
a full sale is unlikely.
For Deutsche Telekom as a whole, the company still expects
adjusted Ebitda to fall to around EUR18 billion this year from
EUR18.7 billion in 2011, while free cashflow is seen at about EUR6
billion.
In the second quarter, the company recorded an almost unchanged
operating profit of EUR4.7 billion, helped by the dollar and
slightly ahead of expectations, and free cashflow of EUR1.67
billion.
Deutsche Telekom also confirmed that it plans to pay a dividend
of at least EUR0.70 a share for 2012.
At 0719 GMT, shares were up 0.9% at EUR9.47, valuing the company
at about EUR40.6 billion.
Write to Philipp Grontzki at philipp.grontzki@dowjones.com
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