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New sales approach helps Deutsche Telekom stem losses of US customers; but revenues slip

FRANKFURT - Deutsche Telekom said Wednesday it stopped losing U.S. customers in the first quarter after it dropped conventional two-year contracts, the German company said Wednesday.

While reporting a modest increase in first quarter net profit, Deutsche Telekom said its T-Mobile USA division saw a small increase in customers under its own brand for the first time in four years.

The company, which had been losing contract customers, switched to a new "un-carrier" approach in March and started selling phones on installment plans. Branded customers rose by a slight 3,000; overall, the company added 579,000 customers to its base of 34 million in the U.S. market.

It said it is getting a further boost from adding the iPhone to its lineup; since the quarter ended, the company began selling the iPhone April 12 and has sold 500,000 since then to new and existing customers.

The company, based in Bonn, Germany, discussed the U.S. business as it reported a 3.5 per cent increase in net profit in the first quarter to 564 million euros ($739 million) from 545 million euros in the same quarter a year ago. Earnings rose in part because the company saw smaller deductions for the depreciation of its U.S. business.

The company also said it had 300 million euros less in accounting-related reductions related to T-Mobile USA and its merger with MetroPCS, which was completed on April 30 — after the quarter ended. The merger is central to Deutsche Telekom's efforts to turn around its business in the United States, where as the No. 4 mobile provider it has struggled against bigger competitors.

Otherwise, sales and earnings slipped.

Revenue fell 4.5 per cent to 58.7 billion euros, while adjusted operating earnings — which exclude financial items such as depreciation related to the merger — declined 4.3 per cent to 4.29 billion euros. That still exceeded the analyst predictions for 4.24 billion euros compiled by financial information provider FactSet.

At T-Mobile USA, the company made 5.32 billion euros in operating earnings, down 5.6 per cent in euro terms, as revenue slipped 8 per cent to 15.37 billion euros. The company said service revenue fell as more customers opted for the new contracts, reducing operating earnings.

Elsewhere, the company said its subsidiaries in Europe battled a slow economy and increased regulation. The company's expenditure on capital investments rose some 40 per cent to over 3 billion euros as it spent money on acquiring radio frequencies in the Netherlands.

Deutsche Telekom shares rose 3.4 per cent to 9.44 euros in morning trading in Frankfurt.


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