DT reports Eur898m loss – update

Europe’s largest telephone company, Deutsche Telekom (DT), reported an unexpected loss of Eur898m in the fourth quarter as half a million customers defected and costs for eliminating 32,000 jobs were absorbed.

DT posted a profit of Eur991m a year earlier, and analysts were expecting a net profit of around Eur667m for the quarter, ended Dec 31. Sales rose 2.4 per cent to Eur15.9 billion euros.

The company’s chief executive officer, Rene Obermann said he plans to reduce costs by Eur2bn in 2007 to counter a four-year slide in fixed-line revenue.

He also said DT would expand internationally and sell its non-essential assets in its broadband and mobile units. Obermann said he does not rule out acquisitions in mobile as part of his new growth strategy for DT.

Last month Obermann cut DT’s profit forecast and is tasked with shedding 32,000 jobs between now and 2008.

He also announced plans to transfer 50,000 workers to the firm’s new customer service division, T-Service which is expected to combine call centre and customer service activities.

Although the measures are designed to cut costs, it will require increasing a week’s work from 34 hours to 38, something Obermann is, today, discussing with union officials.

The company said that it plans to pay a dividend of 72 cents a share – unchanged from a year earlier. It was expected to pay 74 cents a share.

Mike Cansfield, analyst at Ovum said in a stetement: “The DT plan is to grow the top-line to invest and revive the sales channel; rationalise the confusing branding to get more from the large sums the company spends on advertising; improve customer satisfaction; focus on bundles for key market segments (especially the young); invest in a Next Generation Factory… as a means to driving out costs.” Cansfield added: “Arguably none of this is unique but place this in the German setting and it becomes far more complex than the challenges faced by other incumbents such as BT.

“No plans for inorganic growth were announced for mobile, although they did say it was an option they would consider.Overall, I was impressed by Obermann and his management team. His candid approach to discussing the challenges faced by DT is admirable – these are issues the company can no longer ignore as inconvenient.”