Telekom Posts Biggest-Ever Loss for European Company
March 11, 2003
Trading on Europe's stock markets got off to a shaky start on Monday, but analysts mainly put it down to worries over a looming war in the Middle East. The announcement by Europe's top telecommunications operator, Deutsche Telekom, of losses totaling an astronomic €24.6 billion ($27 billion), on the other hand, hardly seemed to ruffle investors' feathers at all.
But that picture quickly changed as the day progressed. By evening, the stock had fallen 9.6 percent to €9.15 ($10.09).
Europe's biggest ever annual corporate loss came mainly from asset write-downs and charges totaling €19.3 billion. Many of the companies that Deutsche Telekom acquired during the bullish 1990s were overpriced, and poor performance has meant their value has fallen sharply.
Core earnings in the fourth quarter also exceeded expectations, rising 14.6 percent to €4.4 billion, and cuts to overall debt topped analysts' forecasts as well. Income from fixed-line services is picking up again, and Telekom's cell-phone division, T-mobile, says it is optimistic its results this year will continue the upward trend started in the last part of 2002.
A turn for the better
The turn-around in the company's fortunes came after a year dogged by falling share prices and a bruising boardroom battle to oust long-term Telekom boss Ron Sommer. The fallout from the fight to head the company has also led to a rash of personnel changes at the top.
The company's new chief executive, Kai-Uwe Ricke, still has a lot to do to turn the company around for good. In particular, he has to do more to slash its mountain of debt, which analysts say reached €61 billion last year. Deutsche Telekom hopes the continuing fall of the dollar against the euro will also help it to cut at least €11 billion from that total by the end of 2003.