Germany Asked to Forgo $1.3 Billion Deutsche Telekom Payout
Stock Chart for Deutsche Telekom AG (DTE)
Deutsche Telekom AG (DTE) worker representatives are asking Germany’s government to forgo at least part of its almost 1 billion euros ($1.3 billion) in annual dividends in exchange for a bigger stake in the former phone monopoly to help finance the cost of faster networks.
“Leave the money in the company and take a higher share,” Lothar Schroeder, Deutsche Telekom (DTE)’s vice chairman and a board member of the Ver.di union, said in a phone interview yesterday. “If you do that for five years, Deutsche Telekom would make some progress in broadband and the government would have something to show for.”
The proposal is part of a strategy devised by labor delegates on Bonn-based Deutsche Telekom’s supervisory board, where they hold ten out of 20 seats. Schroeder says the push is needed as broadband deployment is too slow and patchy and he intends to discuss the plan with politicians. In any case, the government’s stake should remain below 50 percent, he said.
Deutsche Telekom needs to invest billions of euros in upgrading networks in its home market, across Europe and in the U.S. even as phone revenue continues to slide. The company is maintaining pledges for shareholder remuneration while France Telecom SA (FTE) and Telefonica SA (TEF) have cut dividend targets.
Germany, which owns a 32 percent stake in the operator of the T-Mobile brand, is set to receive about 960 million euros this year based on the company’s projection for 3 billion euros in dividends for 2011. The government last month said it aims to meet its constitutional balanced-budget target two years ahead of time in 2014.
Andreas Fuchs, a Deutsche Telekom spokesman, said the operator already invests more in its home market than most European competitors. Bertrand Benoit at the finance ministry declined to immediately comment.
Deutsche Telekom and Ver.di have been at loggerheads for months over wage increases, with the union asking for a 6.5 percent pay rise for 85,000 employees in Germany. Ver.di called for warning strikes last week as three rounds of talks had not produced a compromise. A wage increase of that size may cost Deutsche Telekom about 280 million euros to 300 million euros, based on average pay estimates provided by Schroeder.
Shares of Germany’s largest phone operator have dropped 0.2 percent this year, while Vodafone Group Plc (VOD) declined 3.8 percent, Telefonica dropped 11 percent and Royal KPN NV (KPN) slid 15 percent. Deutsche Telekom today dropped 2.2 percent to 8.85 euros in Frankfurt. The company has a market value of 38.2 billion euros.
The operator on Feb. 23 confirmed its dividend plan for at least 70 cents a share through 2012. It forecast earnings will fall further this year after posting a 1.34 billion euro fourth- quarter net loss because of writedowns on T-Mobile USA and its Greek business. It hasn’t given dividend projections for periods starting in 2013.
Chancellor Angela Merkel’s government plans to reach 75 percent of Germany’s households with broadband connections of at least 50 megabits per second by 2014. To attain that goal, it is relying on Deutsche Telekom, its phone rivals and cable operators to finance the rollout. Deutsche Telekom has budgeted 10 billion euros in the three years through 2012 for its German network.
“Across two world wars, the country has managed to put a copper wire into every household, and I can’t understand that it can’t manage to do the same for fiber,” Schroeder said. “It’s absurd.”
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