Deutsche Telekom posted a 5.2 percent rise in first-quarter core profit on Thursday, in line with forecasts, but mobile earnings missed expectations after a weak performance in Germany and Britain. Europe's largest telecoms operator once again relied almost exclusively on its US mobile business, bought for $40 billion in 2001, to boost growth as business at home struggled with a subdued economy, price-cutting regulators and saturated markets. Group earnings before interest, tax, depreciation and amortisation (EBITDA) before one-off items rose to 4.9 billion euros ($6.3 billion) in the quarter, propelling net profit 60 percent higher to 1.0 billion euros. Sales rose 3.5 percent to 14.4 billion euros, matching forecasts.

"It's the US that is keeping up the numbers," said a buy-side analyst at a major German fund. "If they were to disappoint one quarter, this would be a shock."

T-Mobile USA helped Deutsche Telekom's wireless division, which is cutting spending on promotions in Europe to increase profitability, post a 15.6 percent rise in EBITDA, more than offsetting a 2.9 percent drop at its fixed-line unit.

"These figures demonstrate that we are succeeding in combining clear revenue growth with an even stronger increase in earnings," Chief Executive Kai-Uwe Ricke said, reiterating full-year forecasts.

The company's stock fell 0.07 percent to 14.53 euros by 1236 GMT. It has underperformed the European telecoms index by about 9 percent this year, making it one of Europe's cheapest phone companies at around 11 times this year's earnings.

"We remain of the view that DT looks undervalued versus its peers, few of which will prove immune to the combined competitive and regulatory pressures being experience by European mobile operators," said Nomura analyst Mark James.

T-Mobile USA, now Deutsche Telekom's second-biggest unit after its domestic fixed-line business, again topped forecasts despite competition in the consolidating US market, where it won 957,000 subscribers, boosting earnings by 63 percent.

But T-Mobile Germany won only 89,000 subscribers, undershooting an already weak previous quarter as it said it became more picky in the customers it is chasing. Sales dropped and earnings fell short of expectations, although the core profit margin hit the target 40 percent mark.

In Britain, the company's second-largest European unit, EBITDA fell a hefty 28 percent on 12.8 percent lower sales following regulatory price cuts that compounded the pressure in one of Europe's most competitive mobile markets.

T-Mobile UK's disappointing figures could cast a pall over Virgin Mobile, the no-frills service provider that uses its network and whose 5 million pre-paid customers are added to T-Mobile's total count. Virgin Mobile, whose shares fell after a disappointing third quarter, posts full-year results on May 26.

Copyright Reuters, 2005