Deutsche Telekom plans to slash 32,000 staff in Germany by the end of 2008, including one in four employees at its fixed-line unit, as it struggles to defend its former monopoly position against cheaper rivals.
Europe’s biggest telecoms operator said on Wednesday the job cuts, representing almost a fifth of its German workforce and nearly an eighth of its staff worldwide, would cost it around $4 billion.
It declined to say when it would book the charges or how much it aimed to save through cutting staff. It added there would be no compulsory redundancies before 2008.
“The tough competitive environment in the fixed network and broadband sector in Germany imposed by the regulatory situation intensify the challenges facing the entire Deutsche Telekom group,” the company said in a statement.
Deutsche Telekom, which owns almost all of Germany’s fixed-line infrastructure, has been forced to open up its voice and high-speed Internet networks to competitors and has had the prices it can charge those rivals capped.
Chief Executive Kai-Uwe Ricke said Deutsche Telekom had to do everything possible to be able to react to aggressive price cuts by rivals, even given the high cost of doing so.
“We will defend our sales and our market share tooth and nail, even if this means that the costs temporarily affect our operating profit,” he said in an interview due to be published in Thursday’s Die Welt newspaper.
“It was known that Telekom had surplus staff, above all in the fixed-line business,” said Andreas Heinold, an analyst at Landesbank Baden-Wuerttemberg. “Therefore it’s positive that Telekom is now dealing with this problem.”
The announcement was the latest example of a German company, disappointed at a lack of political direction as horse-trading to form the next government continues more than a month after a general election, taking matters into its own hands.
Unemployment in Germany, Europe’s largest economy, is running at 11.6 percent.
Trade union Verdi — Europe’s largest, which negotiates with Deutsche Telekom on pay and conditions — condemned the planned job cuts, calling them “irresponsible” and aimed only at boosting the company’s share price.
“We take a negative view of the plans and will question every single measure in future talks,” Verdi official and Deutsche Telekom Supervisory Board Vice Chairman Franz Treml said in a statement.
Ricke defended the plans in the newspaper interview.
“Of course 2005 will be a really good year for Telekom from the point of view of profit, and that doesn’t it make it easier for us to communicate this news,” he said in remarks due to be published on Thursday.
“But if we allow ourselves to be blinded by this result, then we won’t be able to secure our business in a sustainable way. We must make the company far more flexible.”
Deutsche Telekom also said it could create 8,000 new jobs in new business areas, including 5,000 if it builds a new 3 billion euro fibreglass network in Germany but has warned it will only do so if it is allowed to keep the benefits to itself.
“Future and present employment potential is greatly dependent on regulatory decisions. For example, if the development of a high-speed fibre-optic network were endangered by regulation of this new market, an additional 5,000 jobs would be jeopardised,” it said in the statement.