Europe’s largest fixed-line carrier reported first quarter net income of 459m euros ($620m), down from 1.09bn euros ($1.47bn) in the year ago period. Unfortunately, this was far less than the 773m euros ($1.05bn) that the markets had been expecting, and is now the fourth consecutively quarterly decline in profits.

Sales, however, did meet market expectations and rose 4.1% to 15.45bn euros ($20.87bn) from 14.84bn euros ($20.05bn) in the year-ago period.

It was in the very same financial quarter, twelve months ago, that most of Deutsche Telekom’s problems began to surface. Back then, the Bonn-based carrier cut its 2006 revenue forecasts as DT admitted that its fixed-line sales were in free fall. Later in the year profit warnings followed, and DT lost its then CEO Kai-Uwe Ricke in November.

Unfortunately, it had become increasingly clear in March 2006 how dependent DT was on its mobile operation, T-Mobile International, to act as its growth driver. Despite that unit’s strong performance over the years, it was clear in the first quarter of 2006 that the mobile operation was not longer able to offset the decline in DT’s fixed-line business.

Over the course of 2006, DT lost a staggering 2.1 fixed-line connections, as customers moved to cheaper alternatives and other mobile operators. This customer exodus continued in the first quarter of 2007 with some 588,000 accounts canceled.

Also twelve months ago, DT had only just begun its much needed, but long delayed, axing of 32,000 positions, a move which prompted bitter street protests and demonstrations in Germany in March 2006.

Twelve months on and not much has changed, as the last minute appeal by CEO Rene Obermann on Thursday to DT staff not to strike fell on deaf ears.

The services union Ver.di said that its membership had voted to authorize a general strike against Deutsche Telekom, after it rejected the company’s offer to delay layoffs at its T-Service unit in exchange for wage cuts and an increase in work hours. Some 20,000 staff are now expected to down tools on Friday.

The Ver.di union is the largest union in Germany and has consistently opposed DT’s plans to transfer approximately 50,000 civil servants, a legacy that DT has carried since it was privatized in 1995. DT is hoping to transfer these staff to a new service unit known as T-Service.

Operationally, in the first three months of this year DT was helped by the rising demand for broadband in Germany, with 572,000 new internet subscribers in the period. However net sales from the combined fixed-line and internet unit fell 4.2% to 4.94bn euros ($6.67bn), as more and more Germans switched to mobile operators such as Vodafone Group Plc’s Arcor unit, and cancelled their fixed lines.

The only other bright point was DT’s T-Mobile mobile phone operation, which added 980,000 new customers in the USA, and 100,000 in the UK. Overall, T-Mobile added 2.8 million customers in the quarter to give it a total mobile customer base of 109.2 million.

But its Services arm (T-Systems) showed that DT was still too focused on the German market after it reported Q1 2007 revenues of 2.9bn euros ($3.92bn), down 5.1% year-on-year. The Enterprise Services division generated 1.9bn euros ($2.57bn) in revenues, down 2.8% on Q1 2006, while revenues of the business services division declined 9.6% to 965m euros ($1.3bn).

According to Ovum, T-Systems has suffered from sluggish business in its home market, which declined by almost 10%, whilst international revenues rose 19%, but not sufficiently to compensate for the domestic difficulties.

Looking forward, DT stuck to its its full-year earnings forecast, saying adjusted earnings before interest, tax, depreciation and amortization will fall to 19 billion euros from 19.4 billion euros in 2006, as competition intensifies in Germany.

DT’s ADS shares on the New York Stock Exchange fell 0.06% to $17.18.