Quarterly Profits Increase at Deutsche Telekom, Telefonica despite Problem-Plagued European Economy

By Ed Silverstein May 08, 2013

Telecom sales in Europe may be poorer than desired, but two key firms – Deutsche Telekom and Telefonica – still saw profits in Q1.

Net profit at Deutsche Telekom edged up 3.5 percent in Q1, which led to a net profit of $738 million. On the other hand, profits at Telefonica jumped 21 percent.

“But both telecoms giants suffered a fall in revenues, largely due to price wars as carriers vie for clients,” according to a report from the BBC. Telefonica’s revenue dropped 9 percent. Deutsche Telekom’s revenue dropped 4.5 percent.

Also, due to the merger between its T-Mobile USA unit with MetroPCS, Deutsche Telekom said that more iPhones were sold in the United States, according to German news reports.

In April, T-Mobile said the number of U.S. subscribers leaving for another brand dropped to 199,000 in Q1, compared to 515,000 in the prior quarter, Bloomberg Businessweek said.

Paul Marsch, a London-based analyst at Berenberg Bank, told Bloomberg Buisinessweek, “Deutsche Telekom seems to have fared better than its peers in Germany.” Deutsche Telekom is Germany’s largest phone company.

When it comes to Telefonica SA, which is Spain’s biggest telephone company, Q1 revenue was lower than projected by analysts.

Many of the company’s Spanish customers are leaving to go with smaller firms. But the company’s sales in Latin America declined recently, too. Yet, Brazil is now Telefonica’s largest market.

Guy Peddy, a Macquarie Securities analyst, told Bloomberg Businessweek that Telefonica’s recent earnings in Spain and in the United Kingdom “were slightly weaker than expected but the market was fearing that they would be even worse.”

“The impact of currency devaluations in Latin America, especially Venezuela, Brazil and Argentina, was very negative,” Borja Mijangos, an analyst at Interdin Bolsa, also told Bloomberg Businessweek. “However, results are overall slightly positive helped by an improvement in profit margins in Spain on cost reductions and its bundled offering.”




Edited by Alisen Downey

TechZone360 Contributor

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