Deutsche Telekom Earnings Miss Estimates on U.S., Germany

(Updates with analyst comment in fourth paragraph.)

Feb. 28 (Bloomberg) -- Deutsche Telekom AG, Germany’s largest telephone company, reported fourth-quarter earnings before some items that missed analysts’ estimates because of higher spending to add customers in Germany and retain mobile- phone subscriptions in the U.S.

Adjusted earnings before interest, taxes, depreciation and amortization fell 13 percent to 4.03 billion euros ($5.3 billion), compared with the 4.16 billion-euro average of analyst estimates compiled by Bloomberg. Revenue slipped 1.4 percent to 14.7 billion euros, exceeding projections. The Bonn-based company confirmed its full-year forecasts today.

Deutsche Telekom in December became Europe’s most recent major former phone monopoly to cut its dividend forecast, allowing the carrier to conserve cash for upgrading networks in Europe and the U.S. With revenue shrinking for a third consecutive year in 2012, the owner of the T-Mobile brand is working on completing a merger of its U.S. division with MetroPCS Communications Inc. to regain market share lost to leaders Verizon Wireless and AT&T Inc.

“They had some breathing space to reach their full-year guidance, so they invested a bit more in marketing than necessary,” said Wolfgang Specht, an analyst at Bankhaus Lampe in Dusseldorf, Germany, who recommends selling the stock.

T-Mobile USA

Shares of Deutsche Telekom slipped 0.8 percent to 8.17 euros at 9:03 a.m. in Frankfurt, valuing the carrier at 35.3 billion euros. The company’s net debt fell 8 percent to 36.9 billion euros in 2012.

T-Mobile USA had net losses of 515,000 contract customers in the quarter, exceeding an estimate of 370,000 losses. Even including 145 million euros of revenue gains from a stronger dollar, adjusted Ebitda fell 23 percent to 805 million euros as the company ramped up marketing and network investments.

MetroPCS shareholders are set to vote March 28 on the proposed merger with T-Mobile. Deutsche Telekom’s earlier attempt to sell T-Mobile to AT&T failed because of regulatory opposition. T-Mobile plans to start offering faster wireless services based on the so-called long-term evolution technology by the end of the quarter, the unit’s chief technology officer, Neville Ray, said in an interview yesterday.

In Germany, mobile service revenue fell 2.8 percent in the quarter because of lower tariffs and a reduction of fees companies charges other operators to terminate calls on their network. Deutsche Telekom spent cash on adding contract and prepaid wireless customers.

Telefonica Earnings

“We are going on the offensive –- with extensive investments in networks and in the market,” Chief Executive Officer Rene Obermann said in a statement.

Fourth-quarter net income was 793 million euros, topping analysts’ estimates. The company recorded 360 million euros in impairment charges, citing tougher competition and regulation in Austria and lower tariffs in Bulgaria.

Spain’s Telefonica SA, which competes with Deutsche Telekom in markets including Germany, the U.K. and the Czech Republic, reported fourth-quarter earnings today that met analysts’ estimates as sales growth in Latin America helped to offset revenue declines in its domestic market. Telekom Austria AG, which competes with T-Mobile in Austria, reported a fourth- quarter net loss.

Obermann said in December that he will step down at the end of 2013, just as the company tries to move from a pure infrastructure carrier to a provider of services like telemedicine and music streaming. Deutsche Telekom is also reviewing the future of EE, the U.K. wireless venture it co-owns with France Telecom SA, and has put the digital classifieds unit Scout24 Holding GmbH for sale.

--Editors: Kenneth Wong, Ville Heiskanen