Deutsche Telekom gets exchange rate boost in Q2

AP News
Posted: Aug 09, 2012 11:06 AM

FRANKFURT, Germany (AP) — An exchange rate shift magnified earnings at Deutsche Telekom's U.S. business and helped the company post a net profit of €614 million ($756 million) in the second quarter of the year.

Deutsche Telekom also said Thursday it benefited from increased use of data-intensive smartphones.

Overall earnings were up 76 percent up over the same period a year ago, when Deutsche Telekom took one-time charges for restructuring its workforce in Germany.

Due to the euro's fall against the dollar, earnings at its U.S. division rose when translated into euro terms as reported in the company's quarterly report. In dollar terms, they were down slightly. The U.S. division has benefited from cost cuts, though the numbers of the most profitable kind of customers — those with long-term contracts — fell.

The Bonn-based company said overall revenues were down 0.7 percent at €14.38 billion and that its European subsidiaries were "holding their ground in a difficult environment." Deteriorating economies in several countries, added regulation, and exchange rate shifts in the Polish and Hungarian currencies also weighed on earnings.

Deutsche Telekom shares traded down 2 percent at €9.20 in late trading in Europe.

In the year-ago quarter, the company had to reduce its earnings for the one-time costs of cutting its workforce in Germany through early retirements.

This quarter the T-Mobile USA business saw sales rise 8.7 percent in euro terms to €3.8 billion, though they dipped 3.1 percent in dollars. U.S. net profit reported in dollars came in at $207 million, down slightly from $212 million a year ago. Customer figures remain a challenge, as the company lost steady, higher-revenue contract customers, partly offset by more prepaid business.

Deutsche Telekom tried to sell T-Mobile USA to AT&T, but the deal was abandoned after U.S. anti-trust authorities opposed it. Cost cutting in the wake of the blocked deal helped profitability at the U.S. business, which consolidated several of its call centers. T-Mobile USA now has 4,600 fewer employees than it did a year ago, at 30,500.

The company said that it grew the number of mobile contract customers across Europe by 1 million to 27.6 million, and that smartphones, which can receive email and access the Internet, now account for 60 percent of devices sold, up from 43 percent a year ago. That increases revenue based on how much data customers send and receive. Mobile data revenues rose 21.5 percent.

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