European telecom firms see profits fall

Will a merger help falling profits?

You'd have thought that with the increase in smartphone and internet use, that it would be happy times for telecoms companies, but two of Europe's biggest - Deutsche Telekom and France Telecom - have seen massive drops in their annual profits.

For 2009, Deutsche Telekom reported a massive drop of 76 percent on the year before with a net profit of $476 million (353 million euros). France Telecom's profits fell by 26 percent giving them a profit of 3 billion euros. They had a distnictly difficult year after investigations into a series of suicides by 24 employees during 2009.

Unsurprisingly, after the string of worker deaths, profits were hit hard during investigations with overall revenue falling 1.9 percent. France Telecom's new chief Stephane Richard said a new scheme this year would put customers and employees "at the heart" of the firm's priorities.

During the 'suicide spree', the company's 'atmosphere' and never-ending drive for efficiency, especially among older employees recruited when France Telecom was part of the public sector, was blamed for playing 'emotional havoc' with staff.

"Bumpy start"

Deutsche Telekom chief executive Rene Obermann was surprisingly upbeat regarding his company's profit drop. He was quite as saying, "After a bumpy start, we rounded 2009 off with good results."

"Cost discipline was key to getting through economically challenging times. However, we did not save at the expense of the future, but continued to invest heavily," he added. 

While the company had made a 3 million euro loss in the final quarter of the year, this had been significantly less than the 730 million euros it lost in the same period a year earlier. As a result, revenue for the year rose 4.8 percent to 64.4 billion euros.

However, this slump for the two companies could be coming to an end. They are planning to merge their UK businesses, to create the UK's largest mobile provide. This would see Deutsche Telekom's T-Mobile and France Telecom's Orange become a sole provider, but the merger is currently being investigated for fears it could threaten competition.

Relevant articles:

New EU-telecom law to be voted on | Orange buys Unanimis | Telecom France's staff suicides

Timon Singh

Timon Singh is a graduate of Liverpool University where he received a degree in Social and Economic History. He has previously worked for BBC Magazines on BBC Who Do You Think You Are? Magazine, the publication for the popular genealogy show.

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