Deutsche Telekom AG (DT) Thursday became the latest European telecoms operator to confirm its full-year guidance, as it reported sales and operating performance in-line with market expectations and said there are signs of stabilization in the U.S., U.K. and Poland, where it has struggled recently.

Still, but for the consolidation of Hellenic Telecommunications Organization SA (OTE) from February, sales and earnings would have fallen. Deutsche Telekom has a 30% stake in OTE, which Thursday reported sharply lower net profit on a retirement charge and weaker mobile and fixed-line revenue, a trend experienced throughout Europe by major operators due to increased competition and regulatory pressure on prices.

OTE contributed EUR1.5 billion to Deutsche Telekom's second-quarter sales and EUR500 million to earnings before interest, taxes, depreciation and amortization, adjusted for exceptional items and restructuring.

The main positive from the second quarter performance was the improvement in Poland, the U.S. and U.K., where Deutsche Telekom has struggled in recent quarters, leading to a surprise profit warning in April.

"We worked hard to counter this trend," Chief Executive Rene Obermann said at a press conference Thursday.

T-Mobile USA improved its second-quarter Ebitda margin by 4.4 percentage points to 30% compared with the first quarter on lower operating costs. T-Mobile USA gained 325,000 customers in the period, for a total of 33.5 million, just half the growth of a year ago.

Despite the margin improvement, Obermann said he wasn't satisfied with the performance of T-Mobile USA.

"In dollar terms there was no growth in the second quarter," he said. "We intend to change that in the medium term, but the turnaround will not be in the third quarter."

Revenue at T-Mobile USA, previously the company's main growth driver, fell 2.3% to $5.34 billion while adjusted Ebitda fell 0.5% to $1.6 billion.

The Ebitda margin in Poland recovered even more strongly as the unit kept tight control over costs.

In the first quarter the company booked a EUR1.8 billion write down on its T-Mobile UK operations, where it has since installed new management. The U.K. is the most fiercly competitive market in Europe, where T-Mobile is up against bigger and stronger rivals in market-leader Telefonica O2 (TEF), Vodafone Group PLC (VOD) and BT Group PLC (BT), and it has lacked scale.

Obermann said T-Mobile UK will unveil its new strategy in coming weeks, amid market speculation that it could also be sold or traded for other assets with a rival. Deutsche Telekom's management declined to comment Thursday on that speculation.

In its home market of Germany, total sales fell 3.8% to EUR1.88 billion on a 5.1% decline in broadband and fixed-line.

The Bonn-based company said net profit in the quarter to June 30 rose 32% to EUR521 million from EUR394 million a year earlier, as interest payments in the period were around EUR200 million less than a year ago.

Revenue for the period rose 7.4% to EUR16.24 billion, while earnings before interest, taxes, depreciation and amortization adjusted for one-time items and restructuring, the company's preferred measure of operating performance, rose 8.4% to EUR5.26 billion, chiefly due to the consolidation of OTE.

Deutsche Telekom also confirmed its guidance for full year adjusted Ebitda, excluding OTE, to be 2% to 4% below the EUR19.5 billion posted in 2008, with an additional contribution of EUR2 billion from OTE. It expects free cash flow for 2009 to be EUR7 billion, including OTE.

"There is lot of work ahead to meet our guidance," Chief Financial Officer said at the press conference.

"Second-quarter results were in line with market expectations and management has made good progress in fixing the problems of the first quarter," said Deutsche Bank analysts. "But the implied EUR3.4 billion improvement in free cash flow needed in the second half of the year will not be easy in our view," they said. Deutsche Bank has a hold recommendation on Deutsche Telekom with a target price of EUR11.50.

At 1035 GMT, Deutsche Telekom shares traded flat EUR8.84, underperforming a higher German market.

Prior to Deutsche Telekom, European peers France Telecom (FTE), BT and Telefonica have all kept their guidance. Telecom Italia SpA (TI) is due to report later Thursday.

Company Web site: www.telekom.de

-By Archibald Preuschat, Dow Jones Newswires, +49 211 138 7218, archibald.preuschat@dowjones.com