MobilCom 1Q Net Profit EUR18 Million V EUR28.3M

FRANKFURT -(Dow Jones)- German telecommunications company MobilCom, Tuesday said first-quarter net profit decreased to EUR18 million from the EUR28.3 million reported for the same period last year.

First quarter earnings before interest and taxation decreased to EUR27 million from EUR44.1 million due to the higher cost of gaining new customers and increased marketing expenditure.

Earnings per share decreased to EUR0.19 from EUR32.

However, group sales rose by nearly 16% to EUR522 million from EUR450.6 million. The company's drive to attract new customers had the anticipated impact on gross earnings, which at EUR112.4 million, were only slightly lower than the EUR124.3 million reported for the same time in 2005.

In addition, despite higher expenditure, the company's cash flow rose to EUR460.1 million from EUR338.2 million by the end of the first quarter. This gives the company the flexibility to continue to generate shareholder value over the long-term and help shape the consolidation of the telecommunications market.

Meanwhile, the Mobile Service Provider segment continued the growth and expansion started in the fourth quarter of 2005, attracting 180,000 new net customers. This follows the loss of 50,000 customers reported for the first quarter of 2005.

The number of mobile telephony customers currently stands at 5 million. However, a drop in customer numbers is anticipated to take place in the next few months, as the volume of contracts expiring in the second quarter is expected to increase.

First quarter Mobile Service Provider sales increased to EUR325.4 million from EUR308.9 million. But due to customer growth activities, gross earnings for this segment dropped by EUR13 million to EUR39.4 million. Earnings before interest, taxes and depreciation decreased to EUR11 million from EUR20.3 million. Depreciation was EUR2.9 million, lower than in the preceding quarters, resulting in an EBIT figure of EUR8.1 million. This compares to the EUR16.6 million EBIT for the same time in 2005.

The Fixed line/Internet segment Freenet felt the impact of intensified competition during the first quarter. Mobilcom management has observed that since February a small number of competitors have been offering even more aggressively priced broadband services on the basis of the "net rental" conditions offered by Deutsche Telekom.

Consequently, Freenet had to increase its marketing expenditure by approximately 50% to EUR13 million. This helped defend its market position and led to 75,000 new broadband customers. As a result, the total number of group broadband customers increased to 775,000 from 465,000.

First-quarter Freenet sales increased by more than 38% to EUR196.6 million. Gross earnings for this segment were EUR73 million, which is on a par with the same quarter of the previous year. EBITDA decreased to EUR27.1 million from EUR36.8 million due to expenses incurred by customer growth-related activities. EBIT also went down to EUR18.9 million from EUR27.5 million.

(END) Dow Jones Newswires"

Posted to the site on 9th May 2006