FRANKFURT (Reuters) - Deutsche Telekom (DE:DTEGn) reported a 1.8 percent drop in quarterly core profit as heavy investments to turn around the U.S. business and to defend its position in its German home market weighed.
Third-quarter earnings before interest, tax, depreciation and amortisation (EBITDA), excluding special items, fell to 4.575 billion euros (4.49 billion pounds), broadly in line with the average forecast of 4.581 billion euros in a Reuters poll.
Europe's largest telecoms operator by revenues said on Thursday it still expected 2014 EBITDA, excluding special items, to remain stable at around 17.6 billion euros in 2014 and that free cash flow would drop to around 4.2 billion euros.
"The challenges vary regionally, but we are clearly making progress everywhere," said Deutsche Telekom's Chief Executive Tim Hoettges.
Deutsche Telekom is preparing for the possibility of keeping its investment in T-Mobile US (N:TMUS) for at least another year after Sprint and Iliad walked away from a deal to buy the United States' fourth-biggest carrier.
The business, which accounts for about a third of its sales and a fifth of its core profits, has long been a drag on cash flows, but has been showing a remarkable turnaround.
Last week, T-Mobile US posted record subscriber growth in the third quarter as its aggressive marketing campaigns paid off, while the cost of integrating its networks resulted in a bigger-than-expected loss.
Investments, excluding expenses for mobile airwaves rose 10.3 percent to 2.5 billion euros in the third quarter, the company said in a statement.
(Reporting by Harro ten Wolde)