Telekom mum on Sprint as earnings beat forecasts

Telekom mum on Sprint as earnings beat forecasts
Deutsche Telekom CEO Rene Obermann Photo: DPA
Deutsche Telekom's head declined to comment Thursday on speculation it was looking at buying US mobile operator Sprint Nextel as it reported better-than-expected first quarter results.

German weekly Der Spiegel reported this week that Telekom was looking to make the most of the strong euro and make a bid for loss-making Sprint Nextel to merge with its T-Mobile USA unit and take on market leader AT&T Wireless.

But speaking in a conference call, chief executive Rene Obermann declined to comment, saying only that in view of recent movements in Telekom’s share price, “certain investors appear to have taken the rumour seriously.”

Net income in the first quarter, adjusted for one-off factors, rose 33.2 percent to €750 million ($1.2 billion), more than €100 million better than the average analyst forecast.

Sales, however, continued to drop due to the weak dollar and pound and cut-throat competition in the German fixed-line telephony market, falling 3.1 percent to €15 billion.

If the dollar and sterling had been at the same exchange rate compared to the euro in the first three months of last year, revenues would have been €500 million higher, Obermann said.

Obermann also said he was satisfied with Telekom’s DSL business. Despite tough competition, the company managed to win 540,000 new customers to hold 43 percent of Germany’s broadband internet market.

But the former monopoly shed a massive 460,000 customers to other providers and Obermann admitted Telekom expected to lose between 1.7 million and 1.9 million traditional telephone connections in this year alone.

The company is also continuing with its rationalization plans. Telekom will cut 13,000 jobs in 2008 and an end to the redundancies is not in sight. “The personnel restructuring is still on the agenda and will continue,” Obermann said.