Sommer puts job on the line with Deutsche Telekom profits pledge

Ron Sommer, the chief executive of German telecoms firm Deutsche Telekom, yesterday put his job on the line as he predicted a brighter outlook despite the tough economic conditions, forecasting double-digit sales and earnings growth for the next four years.

The company, whose shares have come under extreme pressure lately as key shareholders offloaded stock, also outlined plans to slash 15bn euros (£9.4bn) off its 65bn euro debt by the end of next year.

Mr Sommer said debt would be reduced by selling non-core assets and property as well as by floating T-Mobile, its mobile phone unit which owns the UK network One2One, next year. Difficult market conditions have already forced the company to postpone the flotation this year.

The IPO, which Deutsche Telekom hopes will fetch some 10bn euros, will follow in the wake of the demerger of British Telecommunication's mobile phone arm, BT Wireless, scheduled for this autumn.

The company's T-Mobile unit, as well as its recent acquisition of the US cellphone operator VoiceStream, are both expected to play a crucial role in fuelling Deutsche Telekom's overall growth. VoiceStream is expected to post "clearly" positive earnings before interest, tax, depreciation and amortisation (Ebitda), in 2002.

Karl-Gerhard Eick, the chief financial officer, said the company expected annual core operating earnings growth to average 14 per cent between 2001 and 2004, including contributions from VoiceStream.

Deutsche Telekom yesterday reported a 12 per cent increase in Ebitda, to 7.2bn euros in the six months ended 30 June. Its net loss came in at 349m euros on sales, up 17 per cent, at 22.5bn euros. In the half-year period, T-Mobile more than doubled its underlying earnings to 1.4bn euros. "Deutsche Telekom is growing many times more strongly than the rest of the German economy," Mr Sommer said.

Despite the upbeat message, shares in the company slipped 3 per cent to 17.59 euros. The stock had fallen to two-and-a-half-year lows last week as the market grew nervous that more shareholders, who gained holdings through the company's cash-and-shares acquisition of VoiceStream, would bail out.

Earlier this month, Hutchison Whampoa, the Hong Kong-based ports-to-telecoms conglomerate, offloaded 35.5 million shares on to the market. Meanwhile, Sonera, a Finnish telecoms operator, sold some 21.9 million shares.

Mr Sommer dispelled fears over the sale of more shares, saying any such disposals would "go smoother". He believes 170 million shares could hit the market after key lock-up periods expire next month.

He also confirmed that on Monday he met with the German Finance Minister Hans Eichel, who represents the company's biggest shareholder in the German state, although he stressed the meeting was purely routine. The German state holds a 43 per cent stake.

"The Chancellor and Finance Minister have repeatedly stated over the past few months they are supporting the company, the strategy, the execution and me personally," Mr Sommer said.

A finance ministry spokeswoman said Mr Eichel was briefed about recent events at the meeting but did not criticise Mr Sommer. "There is no reason for the government to doubt Ron Sommer," she said.