Staff vote against DT outsourcing plan

Staff representatives on Deutsche Telekom’s supervisory board Wednesday failed to back plans to outsource at least 45,000 employees to lower paying subsidiaries, the key part of the telecommunications group’s restructuring plan.

René Obermann, DT’s new chief executive, did win the backing of a majority of board votes as non-executive directors representing shareholders unanimously backed his plan to get the troubled company back on track.

But the “no” vote by employee representatives, backed by Verdi, the powerful services union, is a clear signal that Mr Obermann will have a tough time implementing his new strategy, which he will explain publicly Thursday.

People close to the supervisory board told the Financial Times that the 10 employee representatives on the 20-strong board backed the other parts of the new plan, which includes the sale of non-core units and new product launches.

Without uncertainty about the implementation of cost cuts, however, it may take a while for investors to feel confident that the new chief executive can make DT lean enough to be able to compete with cheaper rivals.

Shares have fallen as DT has lost 2m customers over the past year as domestic customers have abandoned traditional DT fixed lines in favour of rivals offering less expensive internet and mobile telephone services.

Mr Obermann took over in November after Kai-Uwe Ricke, his predecessor, was ousted by DT’s two main shareholders, the German government and Blackstone private equity, unhappy about the flagging share price.

They managed this only with the vote of labour representatives on the supervisory board, a fact that Mr Obermann will be aware of as he starts talks to implement his plans to force a quarter of his staff to work longer for less pay.

Labour representatives were angry at Mr Ricke for first tabling the outsourcing plan, key to cost savings totalling €5bn by 2010.

They had already voted against an earlier plan, now running, to cut 32,000 jobs by 2008.

Crucially, however, Mr Obermann now formally enjoys the backing of the government, whose representative voted in favour of the outsourcing plan.

This could prove useful if unions turn to politicians for help to derail his plans.

The Verdi services union has threatened strikes if Mr Obermann continues on his path.

It says up to 60,000 of 160,000 DT jobs in Germany might be outsourced, something that could yet draw protests from politicians.