Wednesday March 19, 05:21 PM
Shares plunge as Deutsche Telekom sees lower fixed-line profits
FRANKFURT (AFP) - Shares in Deutsche Telekom (Xetra: 555750 - news) , Europe's biggest telecoms operator, plunged Wednesday after it said that core earnings on its traditional fixed-line operations could fall five to eight percent this year.
Sales would be down four to six percent.
Fixed-line operations director Timotheus Hoettges said sales and earnings should stabilise by 2010, stressing that "the message is -- we are slowing the decrease" on the fixed-line side of the business.
Investors failed to get the message however and shares in the company plunged 7.64 percent to 10.51 euros in afternoon trading to lead losers on the Frankfurt stock market, which had gained 0.26 percent overall.
Earlier in the day, the share price fell as low as 9.92 euros, a level not seen since 2002.
"We understand that we caused confusion, we apologize," Hoettges said after the stock had fallen.
A Deutsche Telekom spokesman said it still expected overall earnings before interest, tax and depreciation (EBITDA) to remain stable compared with their 2007 level of 19.33 billion euros (30 billion dollars), brushing off concern the group might have to cut its full-year outlook.
"We fully and completely affirm this forecast," he said.
Fixed line sales represent around one third of the group's total.
The incumbent German telecoms operator has seen about 4.4 million fixed-line clients pull the plug over the past two years amid growing use of mobile phones and complaints about service.
Deutsche Telekom's German fixed-line operations comprise broadband Internet access as well as fixed phone lines. Last year, sales fell by eight percent and EBITDA dropped by 14 percent on increased competition and lower prices.
Hoettges said Deutsche Telekom sought to cut costs in the segment by one billion euros, of which 900 million euros was to be reinvested in customer acquisition.
He said the company was targeting 1.6 million new broadband internet customers this year, to bring its market share to around 45 percent.
Between 800,000 and 1.1 million clients were expected to switch from classic phone service to Internet-based telephone subscriptions.
Hoettges said Deutsche Telekom aimed to have a market share of 73-75 percent in German land lines by the end of the year.
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