Experimental feature

Listen to this article

00:00
00:00
Experimental feature
or

Thousands of Deutsche Telekom employees briefly downed headsets on Monday to protest about the telephone group’s plans to outsource up to 50,000 staff, or one quarter of its German workforce, to lower-paying subsidiaries.

The “warning strikes” came as labour representatives and Telekom executives met for a last official round of talks to hammer out what looks set to be a make-or-break deal for chief executive René Obermann.

The recently appointed chief wants to cut wages for call centre employees and other service staff by 40-50 per cent, saving €1bn (£680m) a year from July 1. Only drastic steps will allow Telekom to compete with more nimble rivals, he says.

High prices saw the former telecoms monopoly lose 2m traditional fixed-line customers last year as rivals lured consumers with low-priced internet-based telephony and mobile phone offers.

Telekom, as a result, rocked investors with a profit warning late last summer, the departure of then-chief executive Kai-Uwe Ricke in November, and a further profit warning under his successor, Mr Obermann, at the start of the year.

Company officials, who prefer not to be named, warned that failure to get the support of Verdi for the outsourcing could lead to yet another profit warning. “That would be the end of Obermann and Telekom in its current form,” said one.

The lacklustre performance of Telekom’s share price suggests investors do indeed see the talks as the test of whether Mr Obermann can deliver.

Since laying out his plans to take on the unions on March 1, a disappointed Mr Obermann saw Telekom stock fall 10 per cent to under €12.40 three weeks ago, and the current price of about €13.20 is still 3 per cent off.

The Verdi union continues to be unimpressed. Chief negotiator Lothar Schröder, who has threatened full-blown strikes, on Monday took a defiant stance: “We’ve got no indication that things are going in the right direction,” he said.

Mr Schröder wants an agreement leaving wages as they are and guaranteeing that Telekom will not sell the new services subsidiaries. Mr Schröder says Verdi would consider more flexible overtime rules in return.

He fears that pay-cuts would only worsen dismal customer service, while emboldening other companies to seek similar deals, which would not help his ambition to be re-elected to Verdi’s national executive this autumn.

Mr Obermann says Telekom merely wants to lower wages to peer-group levels – levels agreed by rivals to Verdi.

If there is a delay, Telekom could unilaterally impose new working conditions, but this could also increase the risk of a strike.

The German government, which still owns one-third of Telekom, has thrown its weight behind Mr Obermann. It was instrumental in ousting Mr Ricke for failing to address high costs and a sickly share price.

But Verdi officials say that an increasing number of backbench politicians are restive about the dispute. A strike could yet force Berlin to intervene, said one: “Politics only acts when it can’t bear to see what it’s seeing.”

Nonetheless, some union officials concede that beating Mr Obermann might herald an even fiercer successor backed by a government ready at last for the radical steps it continues to shirk: a break-up or piecemeal sale.

Copyright The Financial Times Limited 2017. All rights reserved.
myFT

Follow the topics mentioned in this article

Comments have not been enabled for this article.