D Telekom shortlists partners for T-Systems

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Deutsche Telekom has signalled it expects to find a partner for T-Systems quickly, in spite of the unexpected departure of the head of its business services unit at the end of last week.

“We’ve identified a small number of the most likely potential partners,” René Obermann, chief executive, told the Financial Times.

“We now want to make talks more concrete in the coming weeks.”

Telekom said at the start of March that T-Systems, which provides communications to many German multinationals, was looking to team up with a competitor to expand services and enlarge its footprint.

Mr Obermann admitted that the search had not been helped by the departure of Lothar Pauly, the T-Systems boss, who has been dogged by allegations that he knew of bribery while at the engineering group Siemens.

The exit of Mr Pauly, who denies any wrongdoing while at Siemens, did “not make this process [of looking for a partner] any easier”, Mr Obermann said. “But T-System’s search for a partner continues.”

Mr Pauly’s portfolio has been divided between Karl-Gerhard Eick, finance chief, and technology head Hamid Akhavan, which suggests that Telekom does not expect to have to find a new boss for the unit.

According to Mr Obermann, Mr Pauly resigned to prevent Telekom from being brought into association with the corruption scandal that has embraced his former employer since the end of last year.

Telekom officials said executives had worried that the allegations could delay T-System’s partnering.

Nokia had postponed a merger of its network unit with that of Siemens when the scandal broke.

Telekom’s quest started this spring in parallel with plans to cut the pay of a quarter of the group’s 160,000 German workers, a demand that led to a strike three weeks ago.

The group is burdened by high costs and customer defections, and Mr Obermann wants to cut pay by about €1bn ($1.3bn) by 2010 to match rivals on pricing in the core mobile and broadband markets.

While refusing to name companies on his shortlist, the Telekom chief executive said he was not against a junior role. “We want to create a strong entity. It’s less important whether we hold a majority.”

Aabout a half-dozen companies – including Hewlett-Packard and EDS from the US, Capgemini from France and Tata Consulting Services from India – have been named as potential partners for T-Systems. Mr Obermann defended his decision to publicise the search, which had been questioned internally.

“The alternative would have been a steady stream of rumours that helped no one,” he said. The decision to go public had been designed to minimise uncertainty on the part of customers and employees, he added.

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