Deutsche Telekom to Spend $27 Billion on Network in Germany

Deutsche Telekom AG, Europe’s largest phone company, plans to increase spending on networks in its home market of Germany to ward off rivals including Vodafone Group Plc and Telefonica SA.

The carrier earmarked 23.5 billion euros ($27 billion) in the next five years for its German landline and mobile networks, small cells and the digitalization of infrastructure, Chief Executive Officer Timotheus Hoettges said in Munich on Sunday. The company budgeted 23 billion euros for 2010 to 2015.

The announcement gives a glimpse of Deutsche Telekom’s longer-term financial plan set to be unveiled at an investor meeting next month. The spending puts pressure on Vodafone, whose CEO Vittorio Colao said in November that he wants to reduce outlays when he completes a 19 billion-pound ($29 billion) global network upgrade program dubbed Project Spring next year.

“We can’t start investing and then suddenly stop,” Hoettges said in an interview during the Digital Life Design conference. “Building networks is what we know how to do best - - we’ll leave making apps and creating services to others.”

A network that gives users fast data transmission regardless of where they are will give Deutsche Telekom leverage when negotiating with content providers. Competition for customers may heat up if software makers such as Google Inc. and Facebook Inc. decide to expand into infrastructure in a few years’ time, for example by buying network operators, the CEO said.

Higher spending by Deutsche Telekom bodes well for network-equipment makers, such as Ericsson AB, Alcatel-Lucent SA, Nokia Oyj and Huawei Technologies Co.

Rivals Growing

Germany’s former phone monopoly faces increased competition from Telefonica Deutschland Holding AG, which merged with Royal KPN NV’s E-Plus unit last year and now leads the local market by the number of customers. Vodafone bulked up with the acquisition of cable provider Kabel Deutschland Holding AG the previous year.

Deutsche Telekom shares rose 0.1 percent to 14.06 euros at 9:08 a.m. in Frankfurt. Telefonica Deutschland was little changed at 4.69 euros.

BT Group Plc probably won’t face “major obstacles” buying U.K. wireless operator EE from Deutsche Telekom and Orange SA, Hoettges said. BT is performing due diligence on EE and a deal may be finalized by early next month, people familiar with the matter have said.

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