Millions jump fixed-line ship
It said operating profit, as measured by earnings before interest, tax, depreciation and amortisation (EBITDA), would be €19bn ($24.5bn) compared with its previous prediction of between €19.7bn and €20.2bn.
The group was revising expectations downwards "in accordance with the extremely tough domestic competitive environment and the recent development in foreign exchange rates", it said in a statement.
It is the second time in six months that it has been forced to lower its outlook and reflects a problem faced by many former state monopolies – the steady degradation of their traditional base of fixed-line customers.
Deutsche Telekom has long been losing fixed-line clients to low-cost competitors, mobile operators and internet-based systems such as Skype, but the 2006 figures confirm the trend with 2.3 people million jumping ship.
T-mobile growing
The group could count on 41.2 million fixed-line and internet customers in late 2005, but just one year later the figure was 38.96 million.
Deutsche Telekom said its fixed-line sector, called T-Com, "will continue to play an active role in the expected continued tough pricing competition".
New service and marketing initiatives were being introduced to bolster the business and pre-tax earnings for the sector will therefore be slashed by €800m in 2007 compared with previous forecasts.
The traditionally buoyant mobile phone unit, T-Mobile, will suffer from foreign exchange developments, the company said, prompting it to cut its pre-tax earnings predictions by €200m.
T-Mobile signed up 8.6 million new customers last year, taking its total customer numbers in Europe and the United States to 106.4 million.
‘Can’t work miracles’
However the US arm of the business will see its profits hit by the current strength of the euro.
Revenue was expected to be "moderate" and dividends to shareholders would be €0.72 per share for 2006, the same level as in 2005.
Official figures for 2006 will be published on March 1.
The shift in technological challenges within the sector prompted Deutsche Telekom to name Rene Obermann, the former head of its mobile phone division, as chief executive to replace Kai-Uwe Ricke last November.
But soon after his appointment, Obermann warned he could not "work miracles" in the face of intense competition.
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