Deutsche Telekom Said to Weigh More Job Cuts in Germany

Deutsche Telekom Said to Weigh More Job Cuts to Increase Profit
Deutsche Telekom employs about 125,000 people in Germany. It also sells phone services in European markets including Poland and Greece, as well as in the U.S. Photographer: Michele Tantussi/Bloomberg

Deutsche Telekom AG is reviewing additional job cuts to boost profitability as Germany’s largest phone company meets investors to outline its financial targets today, according to two people with knowledge of the matter.

Chief Financial Officer Timotheus Hoettges wants to reduce the number of staff that perform internal control functions such as measuring business processes, said one of the people, who asked not to be identified because the discussions are private. The review concerns as many as 12,000 positions at the German division and its service units, and no decision has been made on how many of those should go, that person said.

Deutsche Telekom also plans to further lower the number of external service personnel in 2013, another person said. Such cuts may have helped save more than 100 million euros ($130 million) this year at the T-Systems corporate-client division alone, the person said.

“Deutsche Telekom must be asking themselves whether they were advised to take too many employees on board in the course of former reorganizations,” said Heinz Steffen, an analyst at Fairesearch GmbH in Kronberg, Germany, who recommends buying the shares. “If I were them I would also look at their marketing expenses.”

Dividend Pressure

The company doesn’t have a new program to cut jobs, spokesman Philipp Schindera said by phone. Deutsche Telekom will continue to adjust its workforce, and always seeks to re-train redundant employees and find jobs for them in other functions within the company, he said.

The former phone monopoly this year began to implement a plans to trim its administrative workforce in Bonn by 1,300, or about 40 percent of the total, through 2015. Any additional cuts will be on top of those and include different locations, one of the people said.

Lower personnel costs may help Chief Executive Officer Rene Obermann convince shareholders that the carrier can pay a steady dividend and finance network investments even as phone revenue declines. The CEO, who has led Deutsche Telekom since 2006, is scheduled to give investors an update of the company’s strategy at its headquarters in Bonn after market close today.

Deutsche Telekom slipped 0.1 percent to 8.62 euros at 11:01 a.m. in Frankfurt. The stock had dropped 2.7 percent this year through yesterday, while Germany’s benchmark DAX index climbed 26 percent. That company has a market value of 37.2 billion euros.

German Workforce

Deutsche Telekom employs about 125,000 people in Germany. It also sells phone services in European markets including Poland and Greece, as well as in the U.S.

Earnings before interest, taxes, depreciation and amortization as a percentage of sales at the German unit slipped to 41.6 percent in the third quarter from 42.1 percent a year earlier.

The company will probably reduce its dividend to 60 cents per share for both 2013 and 2014, compared with 70 cents the company has pledged for this year, according to analyst estimates compiled by Bloomberg.

Deutsche Telekom today may also specify the cost of speeding up its fixed-line network, after announcing plans to deliver faster Internet connections to 24 million customers in the next four years to take on cable operators.

TeliaSonera, Swisscom

The average Deutsche Telekom employee generated sales of about 249,000 euros last year, compared with the 359,000-euro average for western European carriers, according to data compiled by Bloomberg. Productivity trailed peers including Swisscom AG, TeliaSonera AB and Telecom Italia SpA.

Staff at other European phone companies is also feeling the squeeze of the region’s debt crisis as consumers and companies try to conserve cash.

TeliaSonera, Sweden’s former phone monopoly, in October said it’s reducing its workforce by 2,000 people. French wireless operator SFR, a unit of Vivendi SA, is letting 856 employees go through voluntary departures. Phone equipment makers have been harder hit, with Alcatel-Lucent SA cutting 5,500 jobs, Ericsson AB 1,550 positions and Nokia Siemens Networks more than 17,000 workers.

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