D Telekom to slice 20% of jobs

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Deutsche Telekom, Europe’s largest telecoms company, will cut 32,000 jobs over the next three years, as Germany’s biggest companies press ahead with restructuring at a time of political turmoil in Berlin.

The company on Wednesday announced a €3.3bn ($3.9bn) voluntary redundancy programme to cut one in every five jobs in its home market by 2008, only weeks after Daimler-Chrysler, the carmaker, and Siemens, the engineering group, committed to massive job cuts in their home market.

The latest move followed an announcement by DT that it would not bid for O2, the UK’s second-largest mobile phone operator which Spain’s Telefónica wants to buy for £17.7bn ($31.4bn).

“Deutsche Telekom will not make a counterbid for O2, as this would not be in the interests of our shareholders,” said Karl-Gerhard Eick, chief financial officer.

The announcement sent O2’s shares down almost 6 per cent to 197½p, below the 200p per share offer from Telefónica. Investors have spent the past two days speculating that a counterbid would surface with DT regarded as the most likely alternative bidder.

The German job cuts are aimed at improving DT’s competitive position after the government’s telecoms regulator forced it to allow rivals on to its fixed-line
telephone and broadband networks, and capped access prices DT can charge.

DT on Wednesday blamed “the regulatory situation” for the move, which will cut its global workforce to about 225,000.

The company warned that regulation of its high-speed fibre-optic network under development could jeopardise 5,000 more jobs.

But it also said that an outsourcing deal involving 7,000 workers at Vivento, DT’s employment agency, and the hiring of 6,000 new employees meant a “net reduction” of only 19,000 of 169,000 jobs in Germany this time.

There would be no forced redundancies before 2008.

Analysts applauded, but warned that trade unions might not. Former state monopolies such as DT have seen growth slow in recent years, with analysts pushing them to focus on their cost base to maintain or boost operating margins.

“Incumbents like DT have the problem that they can’t realise technology-driven efficiency gains because job cuts are difficult”, said Thomas Friedrich, an analyst at HVB.

“DT’s move is possible in principle. But it has to persuade the unions.”

Franz Treml, leader of the Verdi union, said: “What they are suggesting are horrific numbers.”

Additional reporting by Ralph Atkins in Frankfurt

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