Deutsche Telekom profit up 76% on sharp cost cuts

Deutsche Telekom, the largest telecoms operator in Europe, has reported an impressive 76.4% year-on-year increase in second-quarter net profit, to €614 million ($755 million), after taking further steps to reduce its costs.

Germany’s former state-owned monopoly reported only a 0.7% dip in revenues, to €14.38 billion, despite the financial headwinds still sweeping Europe.

Even before the onset of the euro crisis, the operator had been contending with fixed-line losses at home, tough competition in Europe’s mobile-phone markets and unsympathetic regulation in the EU.

Deutsche Telekom, the largest telecoms operator in Europe, has reported an impressive 76.4% year-on-year increase in second-quarter net profit, to €614 million ($755 million), after taking further steps to reduce its costs.

Germany’s former state-owned monopoly reported only a 0.7% dip in revenues, to €14.38 billion, despite the financial headwinds still sweeping Europe.

Even before the onset of the euro crisis, the operator had been contending with fixed-line losses at home, tough competition in Europe’s mobile-phone markets and unsympathetic regulation in the EU.

Indeed, the company warns that conditions in Europe are unlikely to get better anytime soon.

“We are keeping our word and providing a good deal of reliability to the market with very solid figures,” said René Obermann, the chief executive, in a statement. “We do of course continue to face a number of challenges, but we are performing very respectably compared with our competitors.”

Besides competition and regulatory intervention, Deutsche Telekom blames further deterioration in the economic situation for a 5.9% fall in European revenues, to €3.42 billion, and an 8.8% slide in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), to €1.2 billion.

Although the operator’s Entertain TV service is enjoying success in its domestic market, revenues from the German business also fell, dropping to €5.61 billion from €5.79 billion a year earlier, while adjusted EBITDA was down by 2.2% to €2.36 billion.

Deutsche Telekom is also struggling in the US market, where the planned sale of its T-Mobile USA business to rival AT&T was abandoned late last year following opposition from regulatory authorities.

T-Mobile USA has lagged rivals with the upgrade of its network and lost some 557,000 contract customers in the second quarter. Nevertheless, thanks to lower handset subsidies and a favourable exchange rate, it reported an 18.6% increase in adjusted EBITDA, to €1.06 billion, on the back of an 8.7% rise in revenues, to €3.82 billion.

The group’s bottom-line success owed much to a sharp reduction in one-off net costs as the organization continues trimming its workforce. Overall employee numbers have fallen from nearly 241,000 in the first half of 2011 to just over 233,000 today.