Deutsche Telekom 3Q Net Profit Up 7.2% On Cost Savings

Deutsche Telekom AG (DT) Thursday posted a 7.2% rise in its third-quarter net profit helped by tight cost control, and became the latest major European telecommunications company to keep its full-year outlook.

Still, in the U.S., once the growth engine of the company, its performance was "unsatisfactory," the company said.

Net profit for the quarter ended Sept. 30 was EUR959 million, up from EUR895 million a year earlier and beating analysts' forecasts for EUR863 million as it trimmed operating expenses.

Revenue for the period rose 5.2% to EUR16.26 billion.

Closely watched earnings before interest, taxes, depreciation and amortization, or Ebitda, adjusted for one-time items and restructuring, the company's preferred measure of operating performance, rose 5.2% to EUR5.53 billion, also just topping analysts' forecasts.

Deutsche Telekom's sales and operating profit benefited from the consolidation of Hellenic Telecommunications Organization (OTE), which contributed EUR1.5 billion to Deutsche Telekom's third-quarter sales and EUR600 million to adjusted Ebitda.

Deutsche Telekom reported for the first time in its new geographical structure.

In the U.S., where Deutsche Telekom runs T-Mobile USA, the country's fourth largest mobile operator, revenue was down to $5.38 billion down from $5.51 billion a year earlier, while its operating profit margin increased by 2 percentage points to 33%. But the company lost 77,000 customers in the July to September quarter in the country, leaving its subscriber base at 33.42 million, just 4% higher than a year ago.

In its home market of Germany and across Europe, sales and adjusted Ebitda fell.

Deutsche Telekom followed European peers Royal KPN NV (KPN.AE) of the Netherlands and France Telecom (FTE) in confirming its full-year 2009 outlook. The German telecoms firm forecast OTE to boost its adjusted Ebitda by around EUR2.0 billion in the 11 months of fiscal 2009 following the consolidation of the Greek firm.

Excluding OTE, Deutsche Telekom forecast Ebitda to fall by around 2% to 4% this year from EUR19.5 billion a year earlier. Deutsche Telekom also said it expects OTE to contribute around EUR0.6 billion to free cash flow, bringing the group's total free cash flow to around EUR7 billion.

Third-quarter free cash flow was EUR3.29 billion, beating analysts' expectations of EUR2.41 billion.

In early reaction, traders said the results were better than expected and they expected the share to rise when trading starts Thursday. Deutsche Telekom's shares closed Wednesday at EUR9.28.

Company Web site: www.telekom.de

-By Archibald Preuschat, Dow Jones Newswires, [phone], [e-mail]