Deutsche Telekom blames cost of 3G licences for 1bn euro loss

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The German telecoms company, Deutsche Telekom, which owns the One2One mobile phone operator, yesterday warned it expected to post a loss for the year but said it still planned to pay a dividend.

The hefty cost of third generation (3G) mobile phone licences, combined with the amortisation of goodwill, were two major reasons behind the anticipated losses.

"The group's net income is not expected to be positive but this will not affect the company's ability to pay dividends," Deutsche Telekom said.

Shares in the company, which had traded as high as 103.56 euros during the peak of the internet boom last year, slumped 3 per cent yesterday.

In the first nine months of the year, Deutsche Telekom reported a net loss of 1bn euros compared with a profit of 8.4bn euros in the same period last year.

That 1bn euro loss included a 1.8bn euro charge to cover goodwill amortisation as well as a 0.9bn euro charge to cover 3G licence costs.

Excluding those costs, the company made a profit of 1.7bn euros compared with 9.6bn euros last year on sales up 19.7 per cent at 35bn euros.

Deutsche Telekom, which hopes to have cut its debt to about 50bn euros by the end of next year, said debt at the end of September totalled 65.2bn euros – a 5.8bn euro reduction from the end of the second quarter.

The fall was mainly attributable to the 1.6bn euros it gained from selling shares in Sprint, the 908m euros it got from selling its Baden-Württemberg cable television business and the sale of shares in Italy's WIND for 2.33bn euros.

The high costs of buying 3G phone licences, particularly in the UK and in Germany, pushed up the debt of many European telecoms businesses.

British Telecommunications, which at the start of the year was battling a £30bn debt mountain, had to carry out a £5.9bn rights issue as well as sell various assets to cut its debt.

Deutsche Telekom, which delayed the flotation of T-Mobile due to volatile market conditions, said the mobile phone arm made up about 26 per cent of turnover in the nine-month period. It is expected to be floated some point next year.

T-Mobile, which includes the One2One business, said it gained 3.7 million new subscribers in the third quarter, bringing the total to 62.4 million.

In the third quarter, that division recorded underlying, or Ebitda, profit of 807m euros compared with a 354m euro profit in the same period last year.

Deutsche Telekom also reiterated previous guidance that it expected group revenues to grow by more than 15 per cent for 2001 with an underlying profit margin of about 30 per cent.