Frankfurt - Europe's biggest phone company Deutsche Telekom AG reported Thursday a 35-per-cent slump in second-quarter earnings as the strong euro and erosion of its German customer base hit the group's profits.

Germany-based Telekom said it booked net profits of 394 million euros (608 million dollars) in the latest quarter compared to 604 million euros.

This followed a 2.9-per-cent drop in second-quarter revenue to 15.13 billion euros with a tough round of savings helping to offset the pressure on the group's earnings.

"We made good progress during the first half of the year in achieving our strategic objectives, both in operations and in cost savings," said Telekom chief Rene Obermann.

But while fierce competition in Telekom's domestic German market led again to a fall in its fixed-line customers, the rise in the euro undercut revenue from the group's US operations, including its mobile phone business, T-Mobile USA, which has been a key driving force behind group profits.

Revenue from T-Mobile USA slipped by 0.8 per cent during the first half also amid growing competition in the US mobile phone market.

The euro hit an all-time high of more than 1.60 dollars during the second-quarter.

At the same time, more than 650,000 German households abandoned their Deutsche Telekom fixed line connection during the second quarter.

The company's broadband and fixed-line unit posted a 6.4-per-cent drop in revenue to 5.3 billion euros in the quarter.

Telekom said group quarterly adjusted earnings before interest, tax, depreciation and amortization (EBITDA) dropped by 1.1 per cent to 4.85 billion euros.

However, it maintained its full-year EBITDA target of about 19.3 billion euros. (dpa)