Deutsche Telekom takes a hit in the first half

German carrier Deutsche Telekom reported a significant drop in net profit for the first half of 2011, from €1.2bn a year ago to €828m this year. Revenues were on the slide as well from €31bn in H1 2010 to €29bn in H1 2011.

Adjusted net profit came in at €1.6bn, versus €1.7bn in the first half of 2010, prompting CEO Rene Obermann to comment on a “persistently difficult environment,” and the company also “seeing light at the end of the tunnel in Southeastern Europe,“ with particular reference to Greece.

Mobile internet continues to be a growth driver, with revenues in this area increasing by 13 per cent year on year to €1.2bn, boosted by growth in the use of smartphones, which now account for 46 per cent of all devices sold by the European national companies compared with 21 per cent one year before. There was also a significant increase in the number of smartphones on the T-Mobile USA network, up by over 50 per cent to almost 10 million within a year.

There were two major events during the first half of 2011 to affect DT’s financials, namely the deconsolidation of T-Mobile UK, which now falls under the Everything Everywhere umbrella, as well as the reporting of T-Mobile USA as a ‘discontinued operation’ due to its proposed merger with AT&T. However, the deal is presently having a tough time of it with the competition authorities.

Ovum analyst Charlie Davies commented: “These numbers and Rene Obermann’s reference to a ‘persistently difficult environment’ underline the challenge facing Deutsche Telekom and many of its peers in combating declining revenues in their core income streams. Deutsche Telekom is betting on sustained longer-term growth in South Eastern Europe to help boost flagging revenue numbers.

“Growth in markets like Poland will be even more important in light of Greece’s ongoing economic woes and the overall shaky economic climate makes this a more risky bet. This means Deutsche Telekom must also maintain progress in reducing opex in order to achieve its targets.”

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