Deutsche Telekom in spending spree to boost growth

BONN, Germany (Reuters) - Germany's Deutsche Telekom unveiled a plan for aggressive expansion next year after posting core earnings and sales that met expectations thanks to another strong performance at its mobile unit.

Europe's largest telecoms carrier said core earnings would fall next year before rising again in 2007 as it steps up plans to spend an extra 1.2 billion euros on winning new customers and launching new products to compensate for losses in traditional markets.

Revenues would grow by around 5 percent in both 2006 and 2007, it added.

In the third quarter, Deutsche Telekom posted adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) that rose 3.7 percent to 5.487 billion euros (US$6.44 billion), in line with the average forecast in a Reuters poll.

Sales also met expectations for the three months to the end of September, coming in at 15.043 billion euros, compared with the average forecast of 14.908 billion in the poll of 17 analysts.

Deutsche Telekom, which is set to be quizzed on its UK strategy in the wake of a 17.7 billion pounds (US$30.7 billion) Spanish bid for O2 Plc, reiterated it expected adjusted EBITDA of between 20.7 billion and 21 billion euros for the full year.

Net debt fell by 3.7 billion euros the quarter to 40.8 billion.

Once again, wireless unit T-Mobile drove growth, increasing sales by 10.6 percent in the quarter and winning 2.2 million new customers.

T-Mobile USA, on which Deutsche Telekom plans to spend billions of dollars upgrading its network for new-generation services, won a better-than-expected 1.1 million new customers in the quarter, and T-Mobile Germany also beat forecasts by winning 530,000 new customers.

Sales in the broadband and fixed-line division, the company's cash cow, continued a long-term decline, falling 0.8 percent to 5.387 billion euros, in line with expectations.

Deutsche Telekom is slashing 32,000 German staff, mainly at its fixed-line unit, to try and help offset sliding revenues.