Rivals squeeze Deutsche Telekom

Deutsche Telekom faced competition in the fixed-line market

German phone giant Deutsche Telekom has seen annual profits decline, as it faces tough competition at home and a drop in prices.

The firm saw net income miss forecasts and drop 44% to 3.1bn euros (£2.13) in 2006 from 5.5bn euros in 2005.

However, although sales in Germany fell by 5% for the year, internationally they were 13.6% higher.

The firm has issued two profit warnings over the past six months, as it faces rivalry in Germany's fixed-line market.

An increasing number of companies in Germany are offering discounted broadband deals, making it harder for the former state monopoly to survive.

Late in January, the firm said it expected profits of 19bn euros ($24.5bn; £12.5bn), after an earlier estimate of between 19.7bn euros and 20.2bn euros in 2007.

The shortfall was due to "extremely tough domestic competitive environment" as well as "the developments in foreign exchange rates", the company said at the time.

The firm's new chief executive, Rene Oberman, is expected to reveal how Deutsche Telekom, whose businesses also include T-Mobile UK and T-Mobile USA, is going to become more competitive later on Thursday.