Report: Deutsche Telekom not to shed IT services

The new management team of Deutsche Telekom AG (DT) has decided against selling its IT services operations, the Financial Times reported on Friday.

At a Thursday meeting of the management board, Helmut Sihler, DT's interim chief executive officer (CEO), opted against disposals in the group's wholly-owned subsidiary T-Systems International GmbH, the newspaper reported, citing sources close to the company.

The decision suggests that Sihler is unlikely to steer away from the four-pillar strategy of his successor Ron Sommer who was ousted earlier this week. Sommer had restructured DT, Europe's largest telecommunications company, around four primary areas of business: fixed network; mobile, Internet and IT services.

The group's IT services are targeted primarily at large corporate customers seeking to integrate local and wide-area networks.

Prior to Sommer's departure, rumors had been swirling that the former CEO was mulling the sale of T-System's IT services arm, among other assets, in a bid to reduce the group's massive debt load of more than €67 billion (US$67.8 billion). [See, "Deutsche Telekom likely to sell more assets," July 10.] Sommer's timetable was to reduce DT's debt to €60 billion by the end of this year and to €50 billion by end of next year.

The IT services arm consists largely of Debis Systemhaus GmbH, which DT acquired from car manufacturer DaimlerChrysler AG. In addition to IT services, T-Systems manages the global network of DT.

According to the FT report, Sihler plans to cut more than €500 million in costs at T-Systems by the end of the third quarter next year. The savings, the newspaper reported, will come mainly through "process optimization" in the server business of the IT services unit and headcount reductions.

Rather than invest heavily in acquiring a footprint in the fiercely competitive U.S. market, the CEO would like to see the unit find a local partner instead, the FT reported.

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