Deutsche Telekom to shed 20pc of German staff
2 November 2005, BONN - Phone giant Deutsche Telekom said Wednesday it would shed nearly one fifth of its German workforce, or 32,000 staff, over the next three years, mainly because of losses at its German fixed- line division.
2 November 2005
BONN - Phone giant Deutsche Telekom said Wednesday it would shed nearly one fifth of its German workforce, or 32,000 staff, over the next three years, mainly because of losses at its German fixed- line division.
The listed company, a former government monopoly that was privatised over a decade ago, has steadily lost both home and office customers as upstart, cut-rate operators have moved into Germany. It has compensated by acquiring mobile-phone business abroad.
In the latest threat to Telekom, Germans are now starting to use cheap internet connections to make phone calls, raising the spectre that phone networks may one day become as obsolete as the telegraph.
Telekom said it expected to spend 3.3 billion euros (3.95 billion dollars) on severance compensation and would not exercise its legal options to sack staff outright. German law allows lay-offs if a company can show it has no work to employ staff at.
As of the end of June, Telekom had a workforce in Germany of 170,000 including more than 46,600 persons with civil-service status that are difficult to dismiss. Worldwide the group employs about 250,000 people.
The Bonn-based company stressed it was continuing to hire staff with other skills, and expected 6,000 new hires in the same period.
After the announcement, Germany's designated economics minister Michael Glos expressed sympathy with those losing their jobs.
"This is very regrettable - but we cannot artificially keep on jobs in which technology has replaced people," he said.
Glos said his future task as economics minister would be to ensure Germany built up a better framework to generate new jobs in the high tech sectors.
One of the main trade unions at Telekom, Ver.di, said it would oppose the move.
A union leader, Franz Treml, who holds a labour seat on Telekom's main board, said all Telekom's moves would be questioned, since the company was making record profits and hinting generous dividends to shareholders.
"The workforce is being left to pay the bill, although they helped in labour agreements to get this company out of the red in previous years," he said.
Over the past decade, Telekom has shed 100,000 staff as call prices in Germany have plunged and automation made technicians redundant.
Telekom's chief of personnel, Heinz Klinkhammer, said the company would approach the government for rule changes so that it could retire older staff who still have civil-service status. Unconfirmed news reports said up to 20,000 of them might have to go by 2010.
Financial markets applauded the long-awaited move, marking Telekom stock 2.5 per cent higher to 14.87 euros. Investors were also approving of a Telekom statement that it was not interested in acquiring British mobile provider O2.
Telekom said it would not counter-bid for British-based wireless service O2 after Telefonica of Spain unveiled a bid valued at 26 billion euros this week for the mobile network.
Its French rival, France Telecom, was more tight-lipped, refusing comment on news reports that it might try to top the Spanish offer. Telecom said in Paris it was making no statements on the topic.
A takeover of O2 would make Telefonica into Europe's second- biggest phone group after Vodafone, knocking aside Deutsche Telekom which is currently runner-up. Telekom had several weeks ago said it was contemplating a joint takeover of O2.
In a scarcely veiled threat Wednesday, Telekom said it might have to shed 5,000 further German staff if regulators blocked its plans for an exclusive, high-speed optical network in Germany.
Deutsche Telekom had sales last year of 57.9 billion euros and earnings of 4.6 billion euros. So far, 2005 quarterly figures indicate strong growth in both, thanks partly to soaring mobile sales.
Subject: German news