Deutsche Telekom's balancing act

Recent worldwide economic volatility may have more to do with blowouts in the mortgage and credit segments than with anything going wrong in telecom, but the telecom industry continues to face its own challenges. Last week's 2Q earnings report from Germany's ILEC incumbent Deutsche Telekom was representative.

DT's net profit took a slap, and the company admitted that more than 500,000 customers cut the cord on traditional wireline voice service. At the same time, like many ILECs around the world, DT also is seeing greater performance from its wireless operations.

In the past, revenue from wireline access and total lines made the economics of ILECs easy to understand. The present is quirkier, as investors and observers try to lock in on a variety of metrics, but can't always see a clear big picture. The next few quarters of earnings reports from DT and other telcos will be worth watching to find out if a balance is achievable, or if cost-cutting needs to continue.

For more:
- The San Jose Mercury News (registration required) covers the story here
- Telecommunications covers it here

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