Deutsche Telekom said it would be “handicapped” from stemming the loss of traditional fixed-line clients as long as T-Online shareholders blocked the integration of its internet unit.

The admission puts pressure on Kai-Uwe Ricke, chief executive, to come up with other ideas for spurring growth at Europe’s largest telecoms company.

Court action by minority shareholders, who claim the group is under-paying for the buy-back of the unit it floated six years ago, proved a drag on first-quarter results as DT sought a remedy for fixed-line woes.

In the past year the company lost 2.7m, or 4.8 per cent, of fixed-line and broadband customers, leaving it with 53.9m subscribers at the end of March. Mobile customer numbers rose by 8.7m, or 11 per cent, to 86.6m, with US growth strongest. Deutsche Telekom said sales gains at T-Online could not counter the decline at the T-Com unit. Combined sales fell 6.1 per cent to €6.2bn ($8bn), while adjusted earnings before interest, tax and other items fell 6.8 per cent to €2.3bn.

Mr Ricke said the units’ delayed merger, slated for 2005 and still blocked by appeals, meant DT was “handicapped” when it came to offering the “bundling” of telephone and internet services that customers were demanding.

On top of that, fierce competition for internet customers meant that T-Online’s adjusted earnings fell 45 per cent from €88m last year to €43m. Only better-than-expected results at DT’s T-Mobile wireless unit helped quarterly group sales record a 4 per cent rise to €14.8bn. Adjusted earnings before interest, tax, depreciation and amortisation rose 2.7 per cent to €5bn.

Spurred by strong growth in the US T-Mobile revenues in its 11 countries rose by 12.3 per cent to €7.6bn as adjusted earnings before interest and other items rose 8 per cent to €2.3bn.

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