Expanding Abroad

With earnings last year hit by restructuring charges and ferocious competition in the home German market, Telekom CEO Rene Obermann, who only took over as head of the company a few months ago, is under heavy pressure to show that he is taking rapid action to boost profitability.

On Thursday, he told the group's annual earnings news conference that overseas acquisitions in the mobile sector -- financed via the sale of non-core activities -- would be a way forward.

"Contrary to what was the case in the past, we're no longer excluding expanding abroad via acquisitions, particularly in mobile telephony," Obermann said.

The chief executive refused to rule out large-scale acquisitions, as long as they made sense and fulfilled "strict financial criteria," he said.

Targeting fast-growth markets

Quizzed about the possible takeover targets, Obermann replied: "We're very dependent on the German, European and US markets. But we don't have any substantial presence in fast-growing markets."

Deutsche Telekom would therefore look in that direction, he said, while refusing to name any specific country.

British mobile phone giant Vodafone recently moved into the Indian market by buying Hutchison Essar for more than $11 billion (8.3 billion euros). Deutsche Telekom had looked ready to embark on a major shopping spree last year when it bought Austrian mobile operator, tele.ring.

But since then, it has had to focus on its own problems at home caused by ferocious price competition and a massive outflux of fixed-line customers.

Selling assets, finding partners

Deutsche Telekom would create financial room for manoeuvre by selling off non-strategic assets, Obermann said. Up for sale were French and Spanish Internet access providers Club Internet and Ya.com, as well as the T-Systems Media and Broadcast unit, a service provider for the broadcasting and media industry.

Asked about the amount of money such divestments could raise, finance chief Karl-Gerhard Eick said that "three billion euros could be feasible in a relatively short term." But the sum "could be more," he said.

The group said it also planned to sell its radio towers in Germany and the United States, and the remaining shares in real estate company Sireo.

Obermann said Deutsche Telekom was also on the look-out for a strategic partner for its information and communications technology unit, T-Systems. Press reports have repeatedly speculated about a possible tie-up between T-Systems and a foreign firm, with French groups Atos Origin and CapGemini, or US firm EDS mooted as potential partners.

Heavy losses due to restructuring

Deutsche Telekom said that fourth-quarter earnings were hit by fierce competition in its home market and heavy one-off charges.

The group booked a bottom-line loss of 898 million euros in the period from October to December, compared with net profit of 991 million euros in the same period a year earlier. The numbers were affected by restructuring charges. Deutsche Telekom is planning to cut 32,000 jobs by the end of next year.