Deutsche Telekom expects stagnating earnings this year as it joined the league of major European telecom operators struggling to defend their dominance on their home turf.

We have battled through the headwind caused by the economic environment, special taxes in several countries, and stiff competition, chief executive Rene Obermann said in a statement on Friday.

He echoed France Telecom's Chief Financial Officer Gervais Pellissier, who acknowledged on Thursday that competition in France was intensifying and that margins were under pressure.

Smaller peer Telecom Italia , whose embattled mobile unit is closely watched, also said on Friday that core earnings as well as sales would likely stagnate this year.

For its part, Spanish rival Telefonica , facing 20 percent unemployment in its home market, also reported results on Friday and forecast a 2 percent gain in revenue this year.

Most European carriers have tried to compensate sluggish growth at home with acquisitions abroad but with limited success.

Deutsche Telekom has not been the boldest of buyers among its peers with the exception of its purchase of U.S. carrier Voicestream over a decade ago.

That business, now known as T-Mobile USA, was a growth engine for some years but has since been sputtering along for several quarters although it is showing signs of stabilization.

Deutsche Telekom said it aims to reach around 19.1 billion euros ($26.34 billion) in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) this year compared with 19.5 billion euros in 2010 and to generate free cash flow of at least 6.5 billion euros.

It also wants to pay a dividend of 0.70 euros per share, lower than 0.78 euros per share in 2009.

Fourth-quarter adjusted EBITDA were 4.5 billion euros, down 10.3 percent, below average analysts estimates of 4.65 billion euros.

Sales dropped 4.5 percent to 15.48 billion euros, in line with expectations.

(Reporting by Nicola Leske)

Germany