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DT Sees Uptick in IPTV

Deutsche Telekom AG (NYSE: DT) is still playing catchup with some of its fellow European carrier giants in terms of IPTV subscriber uptake, but the German carrier is at least showing some signs of improvement.

In announcing his company's second-quarter financial results today, the German incumbent's CEO, René Obermann, noted that the T-Home (domestic fixed line) division had "made good progress in developing the IPTV market with Entertain [DT's telco TV service brand]. By the end of the first half-year, a quarter of a million Entertain packages had already been sold, and almost 200,000 connected."

That means DT added about 46,000 IPTV connections during the second quarter, a slight improvement from the first quarter's 38,000 additions. (See DT Struggles to Entertain.)

During the same period, Orange (NYSE: FTE) added 107,000 domestic IPTV customers to take its French total to nearly 1.4 million, while Spain's Telefónica SA (NYSE: TEF) added around 22,500 new telco TV connections to take its total to nearly 577,000. (See Euro Telcos Ramp Up IPTV Subs.)

The German giant has plenty of room for further growth, too. Its domestic broadband subscriber base now stands at 9.9 million, up 24 percent from the same time last year. Of concern, though, is the rate at which DT is losing fixed-line connections: It now has 29.8 million fixed lines in Germany, 2.27 million fewer than a year ago.

But it will need to double its IPTV subscriber base during the second half of the year if it is to achieve its own target (announced in January) of having 500,000 customers signed up to the Entertain service by the end of 2008, and that looks to be a very tough task: At current growth rates, DT will have between 350,000 and 400,000 IPTV customers come 2009.

DT reported revenues of €15.1 billion (US$23.3 billion) for the second quarter, €7.94 billion ($12.2 billion) of which came from international services. Net income was €394 million ($607 million), down nearly 35 percent from a year earlier, but it was hit by some one-time restructuring charges and interest payments following a credit rating downgrade. Without those costs, the company's adjusted profits were better than last year's second quarter.

The numbers were in line with analyst expectations and enabled DT to stick to its full-year guidance of achieving EBITDA (earnings before interest, tax, depreciation, and amortization) of €19.3 billion ($29.7 billion). The carrier's share price is up by one euro cent on the Frankfurt exchange at €11.37 ($17.48).

DT's global mobile operations contributed nearly €8.7 billion ($13.4 billion) of the revenues, slightly better than a year ago. It has 125 million mobile customers, of which 93.5 million are in Europe and 31.5 million in the U.S.

Obermann also commented on the spying scandal that shook him "to the core" when it was revealed in May. (See Spying Scandal Rocks Deutsche Telekom.)

The CEO said the carrier's security measures and controls had been tightened up, and that DT has "started heightening all employees' awareness of the importance of customer data security and the inviolability of the secrecy of telecommunications. I have explicitly encouraged my employees to inform us of any violations that come to their attention... Procedures have been established for this purpose, such as the Ethics Hotline and the whistleblower process."

He added: "We deeply regret what happened."

— Ray Le Maistre, International News Editor, Light Reading

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