Feb. 27 (Bloomberg) -- Deutsche Telekom AG, Europe’s biggest telephone company, reported a surprise fourth-quarter loss on an impairment charge and announced an overhaul of management and its structure to cut costs and increase market share.

The loss narrowed to 730 million euros ($920 million) from 750 million euros a year earlier, when the company booked a 1.4 billion-euro charge for retirements, Bonn-based Deutsche Telekom said in a release today. Analysts surveyed by Bloomberg predicted a 763 million-euro profit. The charge stemmed from Hellenic Telecommunications Organization SA, Deutsche Telekom said.

The company named Timotheus Hoettges finance chief to succeed Karl-Gerhard Eick, who said in December he will leave before his term ends. Deutsche Telekom will move its fixed-line and mobile-phone operations into one unit, combining sales, marketing and client-service operations for the German units, as well as bundling information technology and purchasing.

“It’s a good move, though there are not any tangible savings mentioned, which suggest it is still in the project stage,” said Rob Goyens, an analyst at Dexia SA, who recommends adding Deutsche Telekom shares.

Deutsche Telekom rose 0.21 euros, or 2.2 percent, to 9.69 euros as of 9:01 a.m. in Frankfurt trading. The shares have lost 27 percent in value in a year before today.

The company plans to pay a dividend of 0.78 euros, unchanged from last year. Revenue in the fourth quarter rose to 16.1 billion euros from 15.9 billion euros a year earlier. The company predicted adjusted earnings before interest, tax, depreciation and amortization this year will be unchanged from 2008, when Deutsche Telekom had Ebitda of 19.3 billion euros.

‘Eick’s Work’

Free cash flow this year will be about 7 billion euros.

“It is very much down to Karl-Gerhard Eick’s work over the past nine years that the company has done so well through some difficult times, and is now on a solid and stable footing,” Chief Executive Officer Rene Obermann said in the statement.

Earnings were hurt by a 500 million-euro impairment charge for Hellenic Telecom, or OTE, as well as 600 million euros in one-time expenses related to job cuts. The Greek state and Deutsche Telekom each hold a 25 percent stake plus one share of OTE. The financial and operating targets for the Greek operator are unchanged, Deutsche Telekom said today.

Deutsche Telekom has battled with falling subscribers at its fixed-line unit as customers disconnect their traditional phone lines and competition for highs-speed Internet access rises.

Losing Customers

Yesterday, Telefonica SA, Europe’s second-largest phone company, said its European operations are being affected by the region’s shrinking economies. Deutsche Telekom said last month it added fewer mobile-phone customers in the fourth quarter as it lost U.K. and Dutch subscribers.

Hoettges is head of the T-Home fixed-line business. Eick leaves March 1 to lead German retailer Arcandor AG. Niek Jan van Damme will head marketing and sales and service for the combined mobile and fixed-line unit. Deutsche Telekom also named Guido Kerkhoff head of a new southeast Europe division, according to a statement late yesterday.

Ebitda at T-Mobile’s U.K. subsidiary decreased 25 percent, which Deutsche Telekom attributed “fierce competition.” In the U.S., T-Mobile added 621,000 new clients in the fourth quarter, with a network covering 130 cities at the end of 2008.

“Today, we are just scratching the surface when it comes to seizing the opportunities available to us in the U.S. market for data and related communications services,” Obermann said.

To contact the reporter on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net

Last Updated: February 27, 2009 03:01 EST