Greece keeps Deutsche Telekom worried

The eurozone crisis ate into Deutsche Telekom AG's business in Greece and other southern European countries in the third quarter and Europe's biggest telecom operator warned tough times are still ahead. "The overall economic situation in the European operating segment remains tense. In Greece and Romania in particular, we expect the economic situation to remain critical this year," the company said.
Greece and Romania are both under IMF-led austerity programmes to shore up their public finances, squeezing consumer spending on telecommunications services. Deutsche Telekom's biggest operation outside of Germany, its 40 percent stake in Greek telecom group OTE, suffered a 5 percent drop in sales and a 7.2 percent fall in adjusted operating profit, while net profit fell 17 percent.
Chief Executive Rene Obermann said although the group had managed to stand its ground in the difficult environment, the uncertainty was not over yet. The former German monopoly bought its first stake in the Greek operator in 2008, hoping to benefit from growth in south-eastern Europe, but a year later was already forced to write down 1.8 billion euros on the investment.
The group kept its 2011 outlook for adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations of around 14.9 billion euros ($20.2 billion) and free cash flow of at least 6.5 billion. For its US business, which it is selling to AT&T Inc for $39 billion, the company expects adjusted EBITDA of around $5.5 billion.
The sale of T-Mobile USA to AT&T, which met with opposition from the US government and competitors, is still expected to close on schedule, Obermann said. Third-quarter EBITDA from continuing operations, excluding special items, fell 2.7 percent to 3.88 billion euros, beating average expectations of 3.82 billion euros. Core profit at its European activities dropped 5.3 percent to 1.4 billion euros, while sales fell 6.1 percent to 3.9 billion, both slightly higher than expected.
Its German operations booked a 1.3 percent lower core profit, with cost cuts partly offsetting a 5 percent fall in revenue due to weaker handset sales and a reduction in mobile "termination" rates - industry jargon for the charges which mobile operators levy each other for accepting calls from different networks.