Deutsche Telekom Said to Plan Job Cuts at T-Systems Unit

Deutsche Telekom AG (DTE) intends to cut more jobs at its corporate-client unit as incoming Chief Executive Officer Timotheus Hoettges seeks to lift profitability at the division, according to a person familiar with the plans.

The job reductions, set to be presented at a supervisory board meeting on Dec. 12, would exceed the current pace of cuts at the unit over the coming two years, said the person, who asked not to be named because the discussions aren’t public. T-Systems’ global workforce fell by more than 2,600, or 5 percent, to 50,200 over the past four quarters.

Earnings before interest and taxes at T-Systems amounted to 2.3 percent of its sales in the third quarter, compared with an average margin of 12.2 percent across Deutsche Telekom. Under the new plan, the division will focus on enabling digital services like Internet in cars or insurances purchased on a smartphone through central servers, according to an internal document seen by Bloomberg News. Classical outsourcing, which costs more because of the required manual input, will be cut back, according to the plans.

“We are thinking about the future business model of T-Systems,” Harald Lindlar, a spokesman for the unit, said in an e-mail. “We don’t speculate about scenarios. It’s a good and established tradition to shape this transition together with our social partners, and we won’t deviate from that.”

Handelsblatt reported the plan earlier today, saying job cuts may total as many as 6,000. The newspaper didn’t say how it obtained the information.

Household Machines

Deutsche Telekom, Europe’s second-largest phone company, fell 0.3 percent to 11.65 euros at 3:03 p.m. in Frankfurt. The stock has gained 36 percent this year.

The market for managing phone and computer systems for companies, which has been the core function of T-Systems since its founding in 2000, is growing at an annual rate of 1.5 percent, according to the internal document. These tasks can be handled more cheaply through partners, the document said.

Hosting client records and software in central data centers, with the option of accessing them through mobile devices or household machines, is expanding by 14 percent every year, according to the document.

Deutsche Telekom’s CEO Rene Obermann is set to step down at the end of the year, to be replaced by Chief Financial Officer Hoettges, who has overseen numerous cost-cutting projects at the Bonn-based company.

Separately, Deutsche Telekom said it will end plans to curb the speeds of its flat-rate unlimited-data Internet plans for heavy users, accepting an Oct. 30 court decision. The company will sell more expensive plans that offer unlimited data with no speed throttles, and cheaper packages which curb the speed after users exceed certain data volume, Niek Jan van Damme, head of the company’s German unit, said on a conference call.

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

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

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