Ex-monopoly fights for share

FRANKFURT - Deutsche Telekom plans to slash 32,000 staff in Germany by the end of 2008, including one in four employees at its fixed-line unit, as it struggles to defend its former monopoly position against cheaper rivals.

Europe's biggest telco said yesterday that the job cuts, representing almost a fifth of its German workforce and nearly an eighth of its staff worldwide, would cost it about 3.3 billion ($5.8 billion).

It declined to say when it would book the charges or how much it aimed to save through cutting staff.

The company said there would be no compulsory redundancies before 2008.

"The tough competitive environment in the fixed network and broadband sector in Germany imposed by the regulatory situation intensify the challenges facing the entire Deutsche Telekom group," it said.

The company, which owns almost all of Germany's fixed-line infrastructure, has been forced to open up its voice and high-speed internet networks to competitors and has had the prices it can charge those rivals capped.

Chief executive Kai-Uwe Ricke said Deutsche Telekom had to do everything possible to be able to react to aggressive price cuts by rivals, even given the high cost of doing so.

"We will defend our sales and our market share tooth-and-nail, even if this means that the costs temporarily affect our operating profit," he said in an interview to be published in this week's Die Welt newspaper.

Deutsche Telekom shares, boosted early in the day when the company said it had no plans to make a costly bid for British company O2, closed 2.55 per cent higher at 14.87, making it one of the top gainers on a 0.7 per cent firmer DAX.

"It was known that Telekom had surplus staff, above all in the fixed-line business," said Andreas Heinold, an analyst at Landesbank Baden-Wuerttemberg. "Therefore it's positive that Telekom is now dealing with this problem."

The announcement was the latest example of a German company, disappointed at a lack of political direction as horse-trading to form a Government continued for more than a month after the general election, taking matters into its own hands.

Unemployment in Germany, Europe's largest economy, is running at 11.6 per cent.

Trade union Verdi condemned the "irresponsible" job cuts.

Ricke defended the plans.

"Of course, 2005 will be a really good year for Telekom from the point of view of profit, and that doesn't make it easier for us to communicate this news," he said.

"But if we allow ourselves to be blinded by this result, then we won't be able to secure our business in a sustainable way. We must make the company far more flexible."

Deutsche Telekom also said it could create 8000 jobs in new business areas, including 5000 if it builds a new 3 billion fibre-optic network in Germany.

But the company has warned that it will only do so if it is allowed to keep the benefits to itself.

- REUTERS