REFILE-UPDATE 1-Deutsche Telekom Q1 in line, confirms outlook

(Refiles to add currency to first and second bullet points)

* Q1 core profit 4.5 bln euros, both in line with estimates

* Q1 sales 14.6 bln euros, also in line

* European ops sales down 23 pct

* Confirms outlook

(Adds CEO comment, detail)

BERLIN, May 6 (Reuters) - Deutsche Telekom (DTEGn.DE) first-quarter sales and core profit met expectations, and the German telecom group said it was on track to meet its full-year targets despite its difficulties in Europe.

The Bonn-based company, which is shrinking to a regional European player after it agreed to sell its struggling U.S. business to AT&T (T.N) in March, said on Friday that the macroeconomic situation in countries such as Greece and Hungary remained critical.

Sales at its European operations dropped 23 percent and core profit was down 13 percent.

In Germany, Deutsche Telekom's home market, business was impacted by cuts in mobile termination rates -- the fees operators charge each other to connect calls -- resulting in a 3.2 percent decline in revenue.

Chief Executive Rene Obermann said the first quarter showed "that there are further challenges ahead" but that the company would reach its targets for a core profit of 19.1 billion euros ($26.68 billion) and a free cash flow of at least 6.5 billion euros.

First-quarter group sales, adjusted for the deconsolidation of its UK operations, were down 3 percent at 14.6 billion euros.

France Telecom (FTE.PA), with whom Deutsche Telekom has a joint venture in the UK and cooperations across Europe, is also facing headwinds from intensifying competition in it's crucial home market that pushed down margins and pressured both mobile and fixed services in the first quarter. [ID:nLDE73S0MB]

Smaller European rival KPN (KPN.AS) was forced to cut its 2011 forecast citing weak domestic revenues in the face of tough competition, [ID:nLDE73K06E].

Deutsche Telekom's group earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 5 percent to 4.5 billion euros. (Reporting by Nicola Leske) ($1=.7158 Euro)