Nov. 5 (Bloomberg) -- Deutsche Telekom AG Chief Executive Officer Rene Obermann plans to make up for fixed-line customer losses by forging ahead in broadband with a bundle of TV, Web and phone services. Cable companies are winning the race.

Deutsche Telekom, Europe's largest phone company, is trailing a target to sign up 45 percent of all new German broadband customers this year. In the second quarter, the tally was running at 40 percent. Cable providers predict as many as 20 percent of new high-speed Web access users will join them this year, up from 10 percent in 2007 and 5 percent the year before, according to Bonn-based industry lobby Anga.

Obermann says he anticipates losing as many as 3 million German fixed-line customers this year, or almost 10 percent, as the country's Federal Network Agency requires Deutsche Telekom to offer so-called naked digital subscriber lines, or DSL, to rivals. Naked DSL allows Web access without a Deutsche Telekom phone subscription, benefiting companies such as Kabel Deutschland GmbH, Germany's biggest cable-television provider.

``Further customer losses to cable providers will put the share price under pressure,'' said Philipp Musil, who helps oversee about $12 billion at Constantia Privatbank AG in Vienna. ``Deutsche Telekom is clearly dominating the German market. But it's easy to take market share from the No. 1.''

Deutsche Telekom's adjusted third-quarter earnings before interest, taxes, depreciation and amortization probably fell 2.4 percent to 5.01 billion euros ($6.43 billion), the median estimate of 13 analysts Bloomberg surveyed by phone and e-mail. Adjusted earnings at the fixed-line division probably fell 4.3 percent to 1.88 billion euros. Deutsche Telekom is scheduled to release earnings before the market opens tomorrow.

`Fiercest Competitor'

Deutsche Telekom didn't invest in upgrading the country's cable networks for accessing the Web while it owned them, helping the company to reduce competition. While cable companies have 35 percent of Switzerland's broadband market, cable operators in Germany have 3.2 percent share.

Now cable providers are betting they can deliver so-called triple-play offerings bundling TV, Web and phone services faster to consumers than the incumbent can roll out its high-speed VDSL network. About 70 percent of German homes have access to cable.

``We are Deutsche Telekom's fiercest competitor in the triple-play market,'' Kabel Deutschland CEO Adrian von Hammerstein said. Kabel Deutschland aims to boost subscribers for phone and Web services to 750,000 from 421,000 by the end of March 2009.

Deutsche Telekom, which has been losing fixed-line users since 2001, saw a slide of 653,000 in the second quarter, up from 582,000 in the previous period. The company probably lost 650,000 in the third quarter, the median of four estimates in the survey.

Cable Customers

Kabel Deutschland said it had 500,000 triple-play customers as of June 30. Deutsche Telekom had about 250,000 clients for combined high-speed Web, phone and television services at that time, according to company spokesman Marc Sausen.

The proportion of Germany's online population using cable modems to access the Internet increased to 3.2 percent from 2.3 percent a year earlier, Berlin-based Initiative D21, a public- private partnership promoting Internet use, said in June. Anga said about 1.35 million Germans access the Web via cable-TV.

Cable providers won as much as 25 percent of new DSL customers in the third quarter, according to estimates by Frank Rothauge, an analyst at Sal. Oppenheim jr. & Cie. They signed up 22 percent in the second quarter, Rothauge said. Sal. Oppenheim has a ``buy'' recommendation on Deutsche Telekom shares.

``The question how much market share Deutsche Telekom will have five years down the road is still open,'' said Bruno Lippens, who manages about $6 billion in telecommunications assets at Pictet & Cie. in Geneva. ``Longer term the market may be split between Deutsche Telekom and the cable operators.''

T-Home

Deutsche Telekom has said it aims to boost users of its combined Web and television service, marketed under the T-Home brand, to 500,000 this year. In 2010, the company plans to have more than 1.5 million such subscribers.

``I'm convinced we'll gain more customers for phone and Internet services than we lose to phone companies offering IP-TV in the coming years,'' said Peter Charisse, the managing director of cable lobby group Anga.

Kabel Deutschland's average monthly revenue per customer rose 16 percent to 10.66 euros in the quarter ended June 30.

That is still low compared with European peers such as Cablecom Holdings AG or Virgin Media Inc. because Kabel Deutschland started to offer Web and pay-TV services late, said Dorothea von Wichert-Nick, a principal at Solon Management Consulting in Munich. ``The distance to European peers has narrowed and will shrink further.''

The financial crisis will affect investment plans, ``but it wouldn't make sense for cable providers to turn off the tap,'' said von Wichert-Nick. ``Budgets are generally approved and the chance for a quick rollout shouldn't be wasted.''

To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net.

Last Updated: November 4, 2008 19:01 EST