Getting Worse Until Things Improve

The Financial Times reports today on Deutsche Telekom’s first quarter results. The expected fall in the domestic fixed-line business was compensated for by a 12 per cent rise in revenues on the part of T-Mobile. A big part of this increase is due to the fact that they added a record 1.2m net new mobile subscribers in the US. Also helpful was their strong UK showing where they are now challenging to take the number one slot.

The one blemish on the report card: Germany. The fixed line T-Com section saw a 6% decline in sales, whilst T-mobile was reported as showing a disappointing drop in margins, “ascribed to one-off effects, increased marketing spend and the feeble German economy”.

James Golob, an analyst at Goldman Sachs, said: “The mobile business accounts for nearly all of our medium-term earnings and sales growth forecasts – and, of that, half is related to the performance in the US.” The German mobile figures “raised concerns that the sudden drop in margins could represent a trend that could last for as long as the weakness in the German economy continues.””

Unfortunately, if I am right about the German economy, this means there could be a long, long wait ahead of us.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".