Deutsche Telekom strike could be near end

Industrial action at Deutsche Telekom edged towards an end on Monday after the operator agreed to extend job guarantees.

Telekom and Verdi, the trade union, agreed to extend job guarantees for about 50,000 staff until 2012, one year longer than management had previously proposed.

The deal on guarantees signalled that the parties were moving towards a final agreement that could end the first strike to hit the German operator since its privatisation more than a decade ago.

Several other issues were still being discussed, but a wage agreement could be announced today, a Verdi spokesman said.

The union resumed negotiations with management last week after more than a month of strike action.

René Obermann, Telekom’s chief executive, wants to reduce the troubled group’s staff costs by as much as €900m ($1.2bn) over about two years.

The savings are needed to keep the group competitive in offering broadband internet and mobile phone services, Mr Obermann says. The strike is the CEO’s first big test since taking over in November last year.

Management has offered job guarantees in exchange for a nine per cent pay cut for 50,000 call centre and maintenance workers, or about a quarter of its German staff.

Without an agreement, Telekom executives have warned that staff would be shifted to existing lower-paying contracts on July 1. This solution would render less hefty wage cuts, but also leave workers without guaranteed employment.

Management has said it is willing to discuss details of a deal with the union, and yesterday’s one-year concession on job guarantees suggested they were nearing an end to the conflict.

About 15,000 union members have been on strike since talks broke down more than five weeks ago.

Mr Obermann says the company needs to cut costs by €5bn not only to be competitive but to survive as a company.

“We have to get a grip on costs to ensure the company and as many jobs as possible survive,” Mr Obermann said in a recent interview with the Financial Times. Lower wages will contribute nearly a fifth of the cost reduction, according to Mr Obermann’s recovery plan.

Falling revenues from traditional fixed-line telephony and sharp competition on mobile phone and internet services have put the company’s structure under pressure.

Mr Obermann was promoted to restructure the company’s cost structure by the German government, which has 32 per cent of Telekom shares, and Blackstone, the private equity group that has 4.3 per cent.

Shares in Telekom are unchanged this year, sharply underperforming the Dax index of the top 30 German blue chip companies, which has risen some 20 per cent.