The results bring a smile on the faces of Telekom bosses

Telekom boss Kai-Uwe Ricke warned "the general and economic situation is and remains difficult", but said the company was hoping to deliver a full-year profit.

The results were much better than financial analysts had predicted.

But like most European telecoms companies, Deutsche Telekom is still saddled with massive debts - now standing at 56.3bn euros (�39.8bn; $64.5bn).

Pay-back time

During the past year, the company managed to pay back nearly 5bn euros by selling its television cable networks in Germany and spinning off investments in foreign ventures like Russian mobile phone operator MTS.

The company hopes to continue its pay-back programme, but wants to be a bit more "discerning" in the future about which assets it will put on the block.

Telekom's vast real estate has already been earmarked for the next phase of the sell-off.

'Outstanding result'

During January to March Deutsche Telekom made a profit of 850m euros ($975m, �602m).

Many telecoms analysts had forecast Telekom to make a loss of up to 1.4bn euros.

The good results compare with a 1.8bn euro loss during the same period one year ago.

Telekom said efficiency savings and buoyant revenues at both its landline and mobile phone businesses contributed to the good result.

"Those results are outstanding," said a trader at a major German bank.

"Ricke is fully on target to cut debt. He has proved he's delivering on his promises."

Two days ago T-Online - Deutsche Telekom's separately traded internet service provider - reported a profit for the very first time.

Deutsche Telekom's profit comes just two months after the company posted what was then the worst results in European corporate history.

During 2002, the company lost 24.6bn euros, mainly caused by the need to correct the value of underperforming investments.