Deutsche Telekom AG and Telecom Italia SpA led a drop in European phone
stocks after the German company said domestic fixedline earnings would slide
this year and on speculation the Italian operator may sell stock.
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Deutsche Telekom and Telecom Italia shares both lost as much as 13 percent. The
21member Bloomberg Europe Telecommunication Services Index fell as much as 3.9
percent, the biggest slide in two months, with only two stocks rising.
Bonnbased Deutsche Telekom, Europes largest phone company, said sales and
earnings at its combined Internet and fixedline unit in Germany will slide this
year. Telecom Italia, which has 35.7 billion euros ($56 billion) of debt, fell
after newspaper Il Messaggero reported the company may raise cash from investors
for acquisitions. At the same time, the European Union reiterated today it will
push for more competition and reduced tariffs.
``This is nothing but fear, said Juan Carlos Acitores, who helps manage the
equivalent of $20 billion at Ahorro Corporacion in Madrid.
Deutsche Telekom fell as much as 1.46 cents to 9.92 euros in Frankfurt trading,
the biggest slide since July 2002. The stock traded at 10.45 euros as of 1:52
p.m. Before today, the stock had lost 24 percent this year. Telecom Italia lost
as much as 17 cents to 1.15 euros, the biggest plunge since September 2001. The
shares traded at 1.23 euros as of 1:52 p.m. in Milan. They had lost 38 percent
this year before today.
Deutsche Telekom Forecast
Deutsche Telekoms adjusted earnings before interest, taxes, depreciation and
amortization at the fixedline division are forecast to fall 5 percent to 8
percent this year, with sales falling 4 percent to 6 percent, the Bonnbased
company said in a presentation today. Last year, the units sales fell 8 percent
and Ebitda slipped 14 percent.
The unit will deliver gross cost savings of 1 billion euros this year, and most
will be reinvested into measures to stabilize sales, Deutsche Telekom said in a
presentation for investors.
Chief Executive Officer Rene Obermann said in January fixed line customer
losses in Germany will continue as more people use mobile phones exclusively.
The company said today it plans to stabilize the units sales and Ebitda in
Telecom Italia may plan a capital increase to pay for takeovers, Il Messaggero
reported, without saying where it got the information. Telecom Italias main
shareholders met in Milan yesterday to discuss strategy and options for a new
board to be elected at the next shareholder assembly, the newspaper said.
Telecom Italia isnt considering selling new shares, Chairman Gabriele Galateri
said, according to comments confirmed by a company spokesman.
Viviane Reding, the European Unions telecommunications commissioner, said in a
statement today that much more work needs to be done to break the market power
of incumbent phone companies.
``The European regulatory model is designed to increase competition in the
telecoms market and this certainly is starting to pay off, Reding said in a
In November, Reding proposed giving national regulators the power to force
dominant phone companies such as Deutsche Telekom and France Telecom SA to open
their fixedline networks to competition. EU legislators are debating the
proposed law, which would allow regulators to split the network and services of
dominant phone companies.
``Regulatory action to bring down mobile termination rates and enforce more
competition in the fixedline market is not good news for the dominant market
incumbents, said Philippe Kiewiet de Jonge, who manages a $166 million
telecommunications fund at ABN Amro Asset Management. ``This is an ongoing
battle between Reding and the big operators and it seems shes determined to
increase the pressure.
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