Deutsche Telekom Agrees to Two-Year, 6.5% Pay Rise

Deutsche Telekom AG (DTE), Europe’s second-largest phone company, agreed to raise wages for 17,000 of its employees by 6.5 percent over two years, saying the deal hurt its bid to contain costs.

The Bonn-based company and the Ver.di union accepted a proposal by a mediator, former Hamburg mayor Henning Voscherau, to lift wages in three stages through Jan. 31, 2014, the two parties said in separate e-mailed statements. The agreement does not concern separate wage talks for Deutsche Telekom’s German unit and the T-Systems corporate-client division.

The result represents a compromise between union demands for a 6.5 percent raise over just 12 months, and Chief Executive Officer Rene Obermann’s insistence that Germany’s former phone monopoly can’t afford to increase worker pay at all. Deutsche Telekom said complying with all the union’s demands for 85,000 employees would cost an additional 500 million euros ($663 million) per year.

“The multi-day mediation talks were a tough piece of work given the entirely outsized wage demands by Ver.di,” Deutsche Telekom’s head of personnel Thomas Sattelberger said in a statement. “The final results hurts us quite a bit, because it doesn’t fit the economic reality of Telekom AG, but it’s significantly below the original demand.”

Talks regarding T-Systems will continue on May 2, Deutsche Telekom spokesman Christian Schwolow said. Negotiations regarding about 50,000 employees at the German unit were broken off last week and haven’t resumed yet, he said.

Deutsche Telekom’s sales may fall for a third year in 2012, sliding 1.7 percent to 57.6 billion euros, according to analysts in a Bloomberg survey.

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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