Deutsche Telekom posts heavy Q4 net loss

February 25, 2011

, BERLIN, Feb 25, 2011 – German telecommunications giant Deutsche Telekom released 2010 earnings on Friday that were basically in line with forecasts and gave a stable outlook for this year, despite a heavy fourth quarter loss.

Depreciation costs, a new Hungarian tax and charges linked to an accord that settled a Polish dispute saw Deutsche Telekom post a fourth quarter net loss of 582 million euros ($800 million).

Analysts polled by Dow Jones Newswires had forecast an average fourth quarter net profit of 414 million euros.

The telecoms operator stressed that the figure "does not reflect the quarter\’s performance" but it tarnished annual results that otherwise met most expectations.

Adjusted core earnings, which Deutsche Telekom uses as its benchmark, declined by six percent to 19.5 billion euros, but that stemmed from the fact that results from the T-Mobile UK unit are no longer taken into account.

The mobile operator was spun off into a separate joint venture with a unit belonging to French telecoms operator Orange.

For 2011, Deutsche Telekom, a former monopoly in which the German government still owns 32 percent of the shares, "expects earnings to remain almost stable" and a core adjusted operating profit of 19.1 billion euros.

The group, which has a strong presence in Eastern Europe and the Balkans, faces headwinds on several fronts.

Greek financial problems are bad news for its OTE subsidiary, new taxes in Hungary are weighing on results, and its T-Mobile USA unit is losing clients.

The domestic German market is picking up however, with sustained demand for smartphones, which accounted for half of all fourth quarter sales.

Deutsche Telekom has also managed to reduce the flood of customers away from fixed-line contracts.

And its T-Systems computer services division, which has been losing money, posted stronger sales and a small operating profit of 137 million euros.

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