T-Online International narrowed its profit guidance today after posting record earnings to calm concerns a German broadband price war could eat into profits.
The German firm, Europe's top Internet provider and a unit of Deutsche Telekom, said it now expected 2004 earnings before interest, tax, depreciation and amortisation (EBITDA) at the upper end of the range of €400 million to €450 million it had previously forecast.
After record second-quarter EBITDA of €130.6 million, up 62 per cent, this would imply a drop in the second half of the year.
But investors were relieved as rival freenet.de had shocked them with a fall in earnings on Monday due to a costly battle for Germany's high-speed Internet clients.
Shares in T-Online, in which Deutsche Telekom holds a 74-per cent stake, traded up 2.8 per cent at €8.15, outperforming the TecDAX index, of which it is the biggest constituent.
The stock had dropped 15 per cent this month on concern about earnings growth.
T-Online is in a fierce race with freenet and United Internet to sign up users of high-speed, or DSL, Internet access. DSL is more lucrative as it is cheaper to provide and users also spend on content such as video or music.
But the providers subsidise the equipment users need to use DSL, weighing on profits. United Internet and T-Online also recently started to subsidise the installation fee and throw in free usage, which also puts pressure on sales growth.
T-Online lowered its revenue forecast to 8 to 12 per cent growth this year after second-quarter sales rose only 11 per cent, down from previous guidance of around 20 per cent.