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Do not be fooled by Deutsche Telekom’s silence following Wednesday’s vital deal with the Verdi services union about cutting the pay of 50,000 of 160,000 German employees.

The mood among executives at the troubled telecoms group is good.

Having sat through a five-week strike, chief executive René Obermann is planning to avoid public declarations until all union members have voted on a long-resisted pay cut at the end of next week, according to people close to the group.

Union officials hinted his reluctance speaks for the compromises he has had to make. When he presented his strategy in March, four months after taking the helm, Mr Obermann demanded a 12 per cent pay cut – and finally agreed to 6.5 per cent.

On top of that, Telekom agreed to compensation payments in cash to ease the pay cuts as they start to affect call centre and line-maintenance workers from next month. They have a job guarantee until 2012, something that has been previously been on the table.

But Mr Obermann’s silence is more likely meant to avoid unseemly gloating. Having coaxed Verdi to accept a 10 per cent rise in working hours plus a pay cut, the gap between his initial demand and the eventual deal is smaller than it appears.

Working longer for less means that a worker’s pay per hour will fall by roughly 17 per cent, instead of the 20 per cent implicit in Mr Obermann’s initial proposition, although cash payments will catch some of the earnings shortfall for three years.

What seems like taking with one hand and giving with another has one vital effect. The wage cuts will add to operating profit, while the one-off payments will come from “below the line” reserves. Telekom’s chances of hitting its targets have risen.

People close to Telekom believe the group will be saving €650m-€700m in wages by 2010, which is within the €500m-€900m window Mr Obermann targeted. In all, he wants to cut costs by €5bn to restore cost-heavy Telekom’s position in its home market.

Analysts have been giving Mr Obermann the thumbs up.

The success on the wage front “materially increases credibility towards management execution”, the telecommunications team at Dresdner Kleinwort in London wrote in a note.

With a number of banks upping their stock-price forecasts, the wage deal signals to many that Mr Obermann will deliver other moves flagged in March – selling non-core assets and finding a partner for business services division T-Systems.

With those pieces of home-work to be completed in the coming months, there seems little to prevent the ambitious 44-year-old from turning his sights on helping to consolidate the European mobile phone market, the sector in which he earned his stripes.

He is already poised to acquire France Télécom’s Dutch operations, which will strengthen Telekom in a strong market. He has said he would like to do more – he even had a look at Telecom Italia Mobile when it was briefly rumoured to be up for sale.

But it would be dangerous for Mr Obermann to let his new agility on the deals front distract him from the questions over staffing at home.

Telekom remains generously staffed. Analysts at Citigroup wrote in a note: “The ‘elephant’ still sits in the corner.”

Management is aware that the planned switch to internet-based telephone networks from 2011 will render up to 30,000 jobs obsolete. Mr Obermann knows that the sooner he prepares for that day – by talking to Verdi – the better.

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