FRANKFURT: Telefonica Deutschland said on Thursday its core profit dropped in the first quarter as a result of integration and marketing costs, while mobile service revenues were down.
The company, which is majority-owned by Spain's Telefonica , said first-quarter operating income before depreciation and amortisation (OIBDA) fell 4.2 percent to 379 million euros ($428.7 million).
That missed even the most pessimistic expectation of 393 million euros in a Reuters poll, with an average of 410 million euros.
Telefonica Deutschland said it had stepped up its marketing campaign to promote its O2 brand in Germany and that it booked 23 million euros in restructuring costs for the integration of E-Plus, which it bought from KPN for 8.6 billion euros in 2014.
Excluding special items and the impact of divestments such as the sale of the yourfone brand in 2015, OIBDA rose 6 percent to 401 million euros in the first quarter.
The telecoms operator said it still expected OIBDA to rise by a low to medium single-digit percentage in 2016, while mobile service revenues, which dropped 1.3 percent in the first quarter, are expected to be stable or slightly lower.
Chief Executive Thorsten Dirks said the group was well on track to reach synergies from the E-Plus acquisition, expecting to reach more than half of synergies this year of the 800 million euros that are pencilled in for 2018.
Telefonica Deutschland shares were down 3.7 percent by 1030 GMT, the worst performer in the STOXX Europe 600 Telecommunications index.
"While there may be some disappointment over Q1 EBITDA growth, we remain optimistic on fundamentals," said UBS analyst Polo Tang, adding that he expected increased investments to be offset by growing mobile data usage and notable price rises.
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