The German mobile operator, which is controlled by Spain's Telefonica and runs the O2 brand, said however that business momentum picked up towards the end of the quarter and it stood by its full-year guidance.
"Our performance was robust in the first half of the year and we are showing relative strength compared to our competitors and the industry," CEO Markus Haas said in a statement.
Revenue nudged higher by 0.3% in the quarter as a decline in mobile service revenues was more than offset by double-digit growth in handset revenues. Core operating margins were squeezed by 1.8 percentage points to 30.9%.
Telefonica Deutschland held its forecast for flat to slightly positive revenue growth and broadly stable to slightly positive profits this year.
(Reporting by Douglas Busvine; editing by Thomas Seythal)