Bloomberg News

Deutsche Telekom Said to Target EU1 Billion Service Savings

December 16, 2011

(Update with share reaction in penultimate paragraph.)

Dec. 16 (Bloomberg) -- Deutsche Telekom AG, Europe’s largest phone company, has set a target of 1 billion euros ($1.3 billion) in savings by 2015 through the merger of its internal computing and communications systems, according to a person with knowledge of the matter.

The person asked not to be named as the target isn’t public. Deutsche Telekom’s supervisory board yesterday approved a plan to merge the information-technology systems and services of its private customer business with that of the T-Systems enterprise unit, spokesman Stefan Koenig said. Deutsche Telekom, based in Bonn, Germany, declined to comment on cost savings.

Chief Executive Officer Rene Obermann is intensifying efforts to reduce expenses as the European debt crisis dampens demand and challenges an attempt to return its non-German business to growth. The T-Systems unit alone sold services valued at 2.6 billion euros within the parent company in 2010. The company doesn’t disclose spending on internal information and telecommunications systems.

Deutsche Telekom yesterday extended the contract Reinhard Clemens, the T-Systems chief who will also oversee the group’s information technology activities, by five years. Obermann will oversee product and innovation after the departure of board member Ed Kozel. Kozel, responsible for technology and innovation, cited personal reasons for leaving at the end of this year, 20 months after his appointment.

Purchasing Decisions

The merger of the internal computing and communications systems is aimed at enabling more centralized purchasing decisions, reduce the need for internal sales and get the various divisions to use matching software, Koenig said.

Deutsche Telekom’s current “Save for Service” cost- reduction program targets 4.2 billion euros in cumulative savings between 2010 and 2012. Last year, Deutsche Telekom completed the combination of its fixed-line and mobile businesses in Germany, and is following that example in other European markets.

Deutsche Telekom added 0.2 percent to 9.05 euros at 9:34 a.m. in Frankfurt trading. The stock has dropped 6.3 percent this year, giving the company a market value of 39 billion euros.

The savings target was reported earlier by Dow Jones.

--Editors: Simon Thiel, Kenneth Wong.

To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net

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


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