The German owner of T-Mobile yesterday became the second mobile phone firm this week to admit that its assets were over-valued by absorbing a £1.3 billion hit on its UK unit.
Deutsche Telekom followed market leader Vodafone by taking a more realistic view of its businesses, saying the recent £17.7 billion takeover of O2 had put down a marker on how much mobile phone firms were worth.
Announcing the write-down of 1.9 billion euros (£1.3 billion), Deutsche Telekom said: "The takeover of the mobile communications company O2 by Telefonica generated an indicator of the market price of T-Mobile UK for the impairment test."
But its impairment losses were dwarfed by the charge of £23 billion to £28 billion signalled by Vodafone on Monday, which is believed to be the biggest in UK corporate history.
Vodafone said most of the writedown would be against its German business, blaming tough conditions and the drop in share prices since it acquired Mannesmann in a landmark deal in 2000.
Unveiling its annual results yesterday, Deutsche Telekom said its T-Mobile UK business saw underlying earnings fall 4.7 per cent last year, but insisted it was winning the battle to find new customers.
The German company said UK earnings of £891 million over the past year masked a record final quarter as new offers persuaded more customers to sign up for its services.
Annual profits were dented by a 30 per cent cut to termination rates - the price that mobile phone firms charge each other and landline operators for putting callers through to their customers - in September 2004 and the absence of an asset sale to match the £50 million gain on its stake in Virgin Mobile. But the impact of this reduction in termination rates fell out of its figures between October and December, fuelling a recovery in fourth-quarter earnings to £207 million or 25.3 per cent higher than last year.
T-Mobile UK ended the year with 17.16 million customers - up 9.1 per cent on the same stage of 2004.