Deutsche Telekom net profit up in first quarter (AFP)

BONN, Germany (AFP) - Deutsche Telekom, the German telecommunications giant, said that group earnings rose in the first three months of the current year, driven primarily by its mobile phone operations, while the fixed telephony business continued to lose ground.

Deutsche Telekom said in a statement that net profit amounted to 1.1 billion euros (1.4 billion dollars) in the period from January to March, an increase of 9.7 percent over the year-earlier period.

Operating profit edged up by 1.4 percent to 4.89 billion euros on a 3.9 percent rise in sales to 14.8 billion euros.

The broadband and fixed-networks business saw operating profit fall by 8.7 percent to 2.231 billion euros and revenues decline by 6.1 percent to 6.156 billion euros.

By contrast, the mobile networks business reported an 8.5 percent rise in operating profit to 2.28 billion euros on a 12.3 percent rise in sales to 7.575 billion euros.

"Overall at group level, we can be satisfied with our first-quarter results," chairman Kai-Uwe Ricke told a telephone news conference.

"They show that we're on the way to achieving the ambitious goals we have set ourselves for the current year. But they also show where we still have 'building sites' -- areas where we have to press ahead urgently and achieve some improvements," he said.

One of the main challenges was the ferocious competition, which was expected to increase even further in future, Ricke said.

Around 160,000 customers each month had cancelled their fixed-line contracts in the first quarter, said chief financial officer Karl-Gerhard Eick.

And while Deutsche Telekom was winning new customers in the broadband Internet business, costs there were very high, Eick said.

Deutsche Telekom complained that the re-integration of the group's Internet services provider T-Online was being blocked by legal action by minority shareholders. And that, in turn, was hitting earnings in the fixed-networks division, chairman Ricke said.

"The market trend is to bundle fixed-line and Internet services. But we're not in a position to do that," he said.

Deutsche Telekom's corporate customer services division, T-Systems, also suffered from price competition.

In view of the problems, Deutsche Telekom shares were showing a loss of 0.25 euros or 1.84 percent at 13.34 euros in late morning trade on the Frankfurt stock exchange.

Looking ahead to the whole of 2006, Deutsche Telekom said it was pencilling in full-year operating profit of 20.2 billion to 20.7 billion euros and full-year sales of 62.1 billion to 62.7 billion euros.

http://us.rd.yahoo.com/