Telefonica Deutschland Profit Gains on Wireless Data

Telefonica Deutschland Holding AG, the Telefonica SA unit that sold shares to the public last week, said profit rose in the third quarter as more customers used mobile phones to go online.

Operating income before depreciation and amortization climbed 13 percent to 339 million euros ($434 million), lifting the profit margin by 1.9 percentage points, the Munich-based company said today. Frederic Boulan, an analyst at Nomura, had estimated operating profit of 330 million euros.

Telefonica Deutschland is valued at about 6.6 billion euros following Europe’s biggest initial public offering this year. The carrier, which operates under the O2 brand in a market less hit by Europe’s debt crisis, vies with Royal KPN NV’s E-Plus for the position of the third-largest wireless company in Germany behind Vodafone Group Plc and Deutsche Telekom AG.

The stock slipped 1.2 percent to 5.86 euros at 9:34 a.m. in Frankfurt. It has gained 4.6 percent since its Oct. 30 debut. Madrid-based Telefonica, Spain’s largest phone company, is scheduled to release earnings tomorrow.

Telefonica Deutschland’s mobile-service revenue rose 5.6 percent to 812 million euros as the share of clients using smartphones rose by 5.7 percentage points to 24.3 percent. Its shares are rated buy by two analysts that have begun covering the company following its IPO.

Most Indebted

Telefonica, the Spanish parent with more than 58 billion euros of net debt, is Europe’s most indebted phone company. Chief Executive Officer Cesar Alierta is reversing a decade-long expansion strategy as it rushes to avoid a downgrade of its debt ratings. The company also plans to sell shares of its Latin American unit and divested a $1.4 billion stake in China Unicom (Hong Kong) Ltd. in July.

KPN, based in the Hague, last month reported a 32 percent drop in profit, citing increasing price competition in Germany. E-Plus in April introduced a 20-euro flat rate for mobile voice and data connections under the Yourfone brand, undercutting its rivals by more than a third.

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