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Telekom's cloudy US outlook

November 8, 2012

Germany's Deutsche Telekom has posted huge third-quarter losses as earnings have been heavily affected by a write-down at its T-Mobile USA division. But full-year profit forecasts and dividends remain unchanged.

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Deutsche Telekom logo (Photo:Hermann J. Knippertz,File/AP/dapd)
Image: dapd

Deutsche Telekom announced on Thursday it had logged its biggest quarterly losses in ten years. The Bonn-based telecommunications giant said it was a full 6.9 billion euros ($8.8 billion) away from breaking even.

The company attributed the negative result to a massive write-down at its T-Mobile USA division, reducing the paper valuation of its assets. The write-down had become necessary under US accounting rules ahead of the subsidiary's planned merger with local telecom firm MetroPCS.

Deutsche Telekom said it hoped the corporate marriage would help it regain some of the many customers T-Mobile USA had lost in recent months. "We view the merger as a future-oriented corporate decision and have been fully aware of the inherent accounting consequences," CEO Rene Obermann said in a statement.

Fleeing customers

In the third quarter alone, 492,000 contract customers turned their backs on T-Mobile USA, bringing the total to well over one and a half million since the beginning of 2012. And although the overall number of clients has been on the increase due to customers in the prepaid segment, the loss of contracts has proven harmful as clients in this segment tend to spend a lot more on a monthly basis.

One reason for contract customers running away in droves has been T-Mobile USA's failure so far to offer Apple's fast-selling iPhone while all other major competitors in the US do. But Deutsche Telekom indicated it would rectify the situation as soon as possible.

Despite the multi-billion-euro loss in the third quarter, Deutsche Telekom on Thursday stuck to its promise of paying a dividend of 0.70 euros apiece. This is also good news for Germany's federal treasury as the state holds a 30-percent share in the company.

hg/rc   (Reuters, AP, AFP)