Deutsche Telekom Reorganises Consumer Unit in Germany

Europe's largest telecoms group has created an integrated Sales & Service management team, which will be responsible for the co-ordination of the consumer-facing business at T-Com, T-Mobile Deutschland and T-Punkt. According to Timotheus Höttges, chief executive officer (CEO) of the group's fixed-line unit, T-Com, and the head of T-Com, Sales & Services in Germany, the new structure guarantees a uniform co-ordinated market approach for all T-Com and T-Mobile Deutschland products across all sales channels and enables customer service to be improved. The new structure will be a platform for the implementation of all measures regarding customer services across all three organisations in the Customer Service, Sales, Technical Customer Service and Market and Quality Management functions.

At the same time, members of T-Com's management board have been assigned individual responsibilities. Phillipp Humm, Sales Director of T-Mobile Deutschland and member of the T-Com management board for Sales, will be responsible for direct and indirect sales, e-Channel and sales marketing. Thomas Berlemann, Managing Director at T-Mobile Deutschland, will be responsible for Customer Service on the T-Com new management board. Roland Folz will take over the new Technical Customer Service board department, which includes technical support for installing fixed-network lines, DSL lines and T-Home for customers. Thomas Dannenfeldt will be responsible for the T-Com board department of Market and Quality Management, focusing on directing centralised sales and service-related tasks in Germany, such as sales management and all customer-related processes. Thomas Freude has been appointed as Managing Director of T-Punkt, responsible for management of store-based retailing from a single source. Existing members of the T-Com management board include Andreas Kindt, who is responsible for Information Technology, Ralph Rentschler, in charge of Finance and Controlling, Dietmar Welslau, in charge of Human Resources, and Christian Illek, as Head of Marketing, while Friedrich Fuß will focus on infrastructural tasks as the Technical Customer Service area will become an independent department.

Deutsche Telekom has not made any official announcement yet about any further plans for job cuts. The group is currently committed to the existing restructuring plan, which involves 32,000 redundancies by 2008, as well as the transfer of 45,000 jobs from T-Com to independent business units as a safeguarding measure. The plan was implemented by the group's former CEO, Kai-Uwe Ricke, but Obermann is likely to stick to the planned job cuts to reduce the company's cost base. Any further reductions of its workforce would have to be negotiated with the trade unions, which oppose any further job cuts.

Outlook and Implications

T-Online in New Structure: Deutsche Telekom's internet unit, T-Online, will become the group's centre for product development under Hamid Akhavan, recently appointed as CEO of T-Mobile International and the group's head of Product Development and Innovation. Akhavan, who was the former CTO (chief technology officer) of T-Mobile International, took over the management of the group's mobile arm from René Obermann, who was appointed as the group's new CEO last year (see World: 6 December 2006: Deutsche Telekom Reshuffles Top Management). With product development responsibilities now bundled and transferred to T-Online, T-Mobile International will now become an international 'product house' for the group. It will be managed by Christopher Schläffer as Group Product & Innovation Officer, who will also take over Timotheus Höttges’ function as Chairman of T-Online. The new CEO is planning to introduce a more customer-service orientated dynamic, with operational focus on improving service quality and customer satisfaction. As the former CEO of T-Mobile International, Obermann successfully turned around Deutsche Telekom's mobile arm with a number of cost-saving measures when the growth in the mobile segment started to decline. His appointment as Deutsche Telekom's new CEO signalled a more customer-oriented strategy, with more competitive product offers and services tailored to customers' needs, backed by top network quality and improved efficiency.

Impact on Growth: The move will enable Deutsche Telekom to leverage its strong position on the broadband market and the growing demand for its DSL products in terms of improving the quality of customer service. An integrated management team will streamline management structures, while the organisational merger will create synergies in terms of resources across the Sales, Technical Customer Service, Service and Market and Quality Management channels. The current restructuring is aimed at speeding up the recovery in customer losses. The company lost 1.5 million fixed-line telephony customers in its domestic market in the first nine months of 2006, due to fierce competition in Germany. Customer exodus to rivals resulted in downgraded 2006 and 2007 earnings and revenue targets, which cost the company's previous CEO, Kai-Uwe Ricke, his job (see Germany: 8 December 2006: New Deutsche Telekom CEO Does Not See Quick Recovery in Customer Losses). Deutsche Telekom has lost ground to major competitors, including Arcor and Mobilcom, which has caused the telco's market share to decline sharply in recent months. In efforts to cut costs and increase scale, the incumbent has recently dropped its controversial plans for its hefty 3-billion-euro (US$3.8 billion) VDSL roll-out in Germany and the closure of its new network to rivals, which even received backing from the German government (see Germany: 15 January 2007: Deutsche Telekom Changes Its VDSL Roll-Out Strategy and Germany: 8 January 2007: Deutsche Telekom Reiterates Plans to Focus on Costs and Price Cuts). Deutsche Telekom has decided to switch its VDSL strategy to the more cost-effective ADSL2+ technology, which will enable the telco to expand the reach of its advanced IP-based services significantly and speed the take-up of IP TV services among its DSL customers. The VDSL network linked only 10 major cities in 2006 at the cost of 500 million euro, with a further 40 planned in 2007. This would significantly slow down the supply capabilities for its triple- and quadruple-play services, including IP TV, on a nationwide scale. In fact, Deutsche Telekom's new IP TV service, branded T-Home, had registered 25,000 customers since its launch in October last year, which rendered its investment in VDSL unprofitable. The urgency to revive growth and boost sales, while keeping margins healthy, was the main reason behind the decision to drop VDSL technology for ADSL2+.