Deutsche Telekom Cuts 2007 Outlook

The newly appointed CEO Rene Obermann addresses the media at the Deutsche Telekom headquarters in Bonn, western Germany, in this Nov.13, 2006 file photo. Deutsche Telekom AG on Sunday, Jan 28, 2007 issued a profit warning for this year, cutting its earnings outlook due to "extremely tough" competition and the impact of a strong euro. (AP Photo/Frank Augstein) (Frank Augstein - AP)

BERLIN -- Deutsche Telekom AG issued a profit warning Sunday for this year, cutting its earnings outlook as it faces fierce competition in Germany and absorbs the impact of a strong euro.

The Bonn-based company said it now expects 2007 adjusted earnings before interest, taxes, depreciation and amortization of 19 billion euros ($24.6 billion) _ down from a previous forecast of 19.7 billion to 20.2 billion euros ($25.5 billion to $26.1 billion).

The change resulted from "the extremely tough domestic competitive environment and the recent development in foreign exchange rates," a company statement said.

Deutsche Telekom said its T-Com fixed-line business would play an "active role in the expected continued tough pricing competition" this year. It said that would entail "significantly increased expenditures for service and marketing."

As a result, it said, pretax earnings in the broadband and fixed-line business will be 800 million euros ($1 billion) lower than previously estimated.

The company said recent exchange-rate developments have had a negative impact on revenue and earnings for its mobile business. That prompted it to cut 200 million euros ($258 million) from the business's pretax earnings outlook.

Deutsche Telekom's mobile business includes T-Mobile USA. The U.S. dollar recently has been under renewed pressure against the euro.

Strong price pressure in the German mobile market and additional marketing expenses resulted in another 200 million euros ($258 million) being cut from the forecast, Deutsche Telekom said.

It added that it expects a "moderate increase" in group revenue this year.

For 2006, the company said according to a preliminary assessment, it had total revenue of 61.3 billion euros ($79.2 billion) _ falling short of its target range of 61.5 billion to 62.1 billion euros ($79.5 billion to $80.2 billion).

However, it said it expected to meet its pretax profit forecast of between 19.2 billion and 19.7 billion euros ($24.8 billion and $25.5 billion).

The company's new chief executive, Rene Obermann, took over in November pledging to win over customers by improving Deutsche Telekom's service while also cutting costs.

Over the course of last year, Deutsche Telekom said, it lost more than 2 million fixed-line narrowband customers _ a decline of 5.5 percent _ with the total declining to less than 39 million.

However, it saw a 37 percent increase in broadband subscriptions, which rose to more than 11.7 million in total.

The company also saw an 8.8 percent rise in mobile customers, who numbered 106.4 million by the end of 2006.

T-Mobile USA saw customer numbers rise by 15.4 percent to 25 million. In Germany, Telekom's mobile arm posted a 6.4 percent gain to 31.4 million customers.

Deutsche Telekom said it still plans to recommend a dividend for 2006 that will at least match the previous year's 72 euro cents (93 cents) per share.