November 7, 2013 / 6:26 AM / in 4 years

UPDATE 2-Deutsche Telekom feels German mobile price war pinch

* Q3 adj. EBITDA 4.66 bln euros vs Rtrs poll avg 4.58 bln

* German mobile revenues slip despite gain in customers

* Shares fall after deal-fuelled sector rally (Adds analyst comment, shares)

By Harro Ten Wolde

FRANKFURT, Nov 7 (Reuters) - Deutsche Telekom has posted a drop in wireless revenue despite adding 470,000 new mobile customers in the third quarter, highlighting the impact of a price war in its home market.

Europe’s third-largest telecoms operator by revenue is engaged in a fight with Telefonica Deutschland, Vodafone and KPN’s E-Plus to attract customers in a country that has been relatively slow to switch to smartphones from basic mobiles.

This has forced the former monopoly to offer cheaper packages that have weighed on revenue. In the third quarter, wireless service sales dropped 2.8 percent in Germany, the European Union’s largest mobile market with around 114 million subscribers.

“The reasons for this were first and foremost the intense competition and also the new reductions in ‘roaming’ charges implemented in the summer,” said Tim Hoettges, chief financial officer, referring to European regulations forcing operators to cut fees for travelling clients.

Shares in Deutsche Telekom, which also posted a higher-than-expected core profit, were down 3.2 percent by 1130 GMT, paring recent strong gains as the sector as a whole was boosted by a flurry of deal-making.

The company’s rivals face similar competition issues.

Telefonica Deutschland’s wireless revenue fell 5.7 percent in the quarter, while E-Plus, being bought by Telefonica, saw revenue drop 7 percent. Vodafone, Germany’s second-biggest mobile operator, will release results on Nov. 12.

Deutsche Telekom’s underlying wireless service revenue, which excludes the latest fee cuts mandated by regulators, were down 1 percent compared with a 1 percent rise in the second quarter.


For the full year, Deutsche Telekom said it expects underlying wireless service revenue to be stable, having previously forecast growth.

Simon Weeden, an analyst at Citi Research, said the new forecast implied zero underlying growth in the fourth quarter.

A rally in telecom stocks which carried Deutsche Telekom to a five-year peak of 11.93 euros last month was fuelled in part by hopes of further mergers and acquisitions, such as Vodafone’s 7.7 billion euros ($10.4 billion) purchase of Germany’s biggest cable provider.

Earlier this year the two smaller German mobile operators, E-Plus and Telefonica Deutschland, said they would merge to create the country’s third-biggest mobile player, with a 30 percent market share - close behind Deutsche Telekom and Vodafone which each have roughly 35 percent.

The M&A upturn was seen as potentially positive for Telekom, if only because it could emerge as a winner in a consolidated European market.

Meantime the German group said third-quarter core earnings or EBITDA (earnings before interest, tax, depreciation and amortisation) excluding special items fell 2.6 percent to 4.66 billion euros as investments weighed.

The result was above the average forecast of 4.58 billion in a Reuters poll.

The company still expects EBITDA excluding special items to come in at around 17.5 billion euros in 2013 and free cash flow of around 4.5 billion.

Deutsche Telekom’s 74 percent owned T-Mobile US Inc , the No. 4 U.S. mobile provider, on Tuesday reported much higher-than-expected subscriber growth. ($1 = 0.7392 euros) (Editing by Noah Barkin and David Holmes)

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