Big bonuses for Telekom chiefs

Senior management at Deutsche Telekom, which goes public next month in a DM76bn (pounds 31bn) stock market flotation, will be eligible for bonuses equivalent to a least half their salary, provided financial targets are met.

But Dr Ron Sommer, chief executive officer, said he and his fellow executives would receive no British-style share options in the international public offer.

The bonus system, he said, would be tied to the success of Deutsche Telekom and would reach down from the management board to include the company's top 3,000 managers.

The shares are expected to be priced at the top end of the DM25-DM30 range set by the company and its advisers, which will mean an instant profit for investors. Yesterday the shares were trading at between DM33 and DM39 in the unofficial grey market.

The offer will raise about DM15bn to pay down Deutsche Telekom's debt and will result in the German government's holding falling to 80 per cent of the enlarged equity. A minimum of a third of the issue has been earmarked for overseas institutions, with between 8 and 12 per cent of the shares on offer underwritten in London.

The offer has been pitched at private German shareholders in the style of the Sid campaign that awakened British investors to the joys of privatisation. Up to half the shares may be reserved for the German retail offer, such has been the interest, with more than 3 million registrations.

Any private UK investors wanting to take part will have to subscribe in the German retail offer and to do that they will have to open a German bank account through either Deutsche Bank or Dresdner Bank.

Deutsche Telekom aims to cut its staff by 60 per cent to 170,000 by 2000 as part of massive rationalisation programme but Dr Sommer disputed suggestions that it still had a long way to go before it matched the likes of British Telecom.

"Perhaps they should be comparing themselves with us because we are the envy of many other telecom operators," he said.