Sales of TMobile in Germany thus fell by 3

The major shareholders of Deutsche Telekom eventually lose patience. Ten years almost day to day after the introduction on the stock exchange operator Telecom German, its CEO, Kai - Uwe Ricke, has been pushed towards the exit. After four years of service, he was replaced, 15 days ago, by René Obermann, previously pattern of mobile activity. Although they remained discreet on the handover of power, the German State (first shareholder with still 32 of the capital) and Blackstone (4.5 shareholder) investment fund certainly strongly pushed for the change.

And if the "is not really a surprise, it testifies to the growing influence of Blackstone in the operator", note ING. Attracted by the hearty risk-taking of Deutsche Telekom, the Fund had entered the capital in April, with EUR 2.7 billion on the table (14 euros by title) and depleting then no praise for his fundamental and its management. Five months later, he publicly expressed his dissatisfaction with the operational performance of the group. And its stock market courses!

Because, after a new warning on its 2006 and 2007 results, the action of the first operator European telecom and number three world by turnover hit a lower annual 10.84 EUR this summer. Like the sector, it is certainly taken since. But its course is still less than emission (14.57 EUR). "The effect Blackstone", which will be propelled it to its highest of the year in may, was of short duration. As historical record of 104 euros registered in full telecoms bubble, it is a distant memory... Close to 14 euros, the title still displays a fallback of some 17 since early 2005. At the same time, the features of the Frankfurt Stock Exchange DAX index gained 34 and Telecom European values is folded by 5.

Long-term risk

"We must admit that the Group grows more in Germany", was released in August ex-PDG. Accounting for more than half of the activity of the group, revenues in the domestic market declined by 2.7 in the first nine months of the year. The operator is facing the same challenges that most of his European colleagues "with cable-operators and alternative operators eating its fixed subscriber base and turbulent mobile operators in its domestic market", says Credit Switzerland.

But, "Unfortunately for Deutsche Telekom, its division fixed between just in a period of intense competition", noted UBS, while "some markets are more advanced than others." Since the beginning of the year, he lost more than 1.5 million customers, primarily in fixed telephony, which the traditional economic model flies in chips with the emergence of the Internet (VoIP) telephony.

Cash for some 45 of the gross surplus of exploitation and the risk-taking of the operator, "the activity of fixed telephony from a stable turnover to a decline of 4 in the last six quarters", said UBS. "The idea of the fixed in 2007 growth is illusory." And "given high margin rates and the large contribution of the fixed to the cash flow, long-term prospects could be risky," continues to Morgan Stanley.

Especially since Deutsche Telekom does not suffer only offers ADSL from competition. He also undergoes head-on the impact of the fixed mobile substitution. On this land there, the battle is even tougher than that delivered by France Telecom in France. E Plus (subsidiary of Dutch KPN) and O2 (fallen in the Telefonica anyway) have indeed opened a real price war to grab market share in the T-Mobile (Deutsche Telekom subsidiary) mastodons and Vodafone, which have about 40 of German customers.

Result, they "lose ground in a market which itself folded because of declines in price and the movement of the package to prepaid offers customers". The regulator is not in rest, requesting a decrease in the price of calls from fixed to mobile. The European Commission, it requires a decrease in the price of calls abroad ("roaming").

Sales of T-Mobile in Germany thus fell by 3.6 over the nine months. "A consolidation of the market is absolutely necessary, says Morgan Stanley." Without this, operators, and in particular the smaller two, will continue to try to gain market share. "Facing this, Deutsche Telekom is the response. On the commercial front, through the integration of T-Online after the buyout of minority interests, it has recently launched coupled offers (Internet phone TV) and decided to follow the decrease in prices in the mobile. A much belated response, in the opinion of analysts. On the technology front, he began to deploy a very broadband network. But he wishes to be exempted from regulation before investing more heavily.

Insufficient competitiveness

Whatever happens, these steps do not solve the structural problems faced by the operator: costs are "20, 30 and sometimes 50 higher than the competition", admittedly even resigning CEO. Deutsche Telekom has certainly decided to remove 32,000 jobs here in 2008 (or 13 of the workforce) and transfer 45,000 employees of its fixed pole to a new unit focused on services. It also provides trim on its investments and yield for 3 billion of assets over the next three years.

But these measures are considered generally insufficient: "Action needs something more radical than a backup plan to compensate pressure unprecedented domestic income growth", j. Credit Switzerland. "Reducing investments from one year to another to offset the fall in Ebitda is not a tenable strategy, continues to Morgan Stanley. "The language of Deutsche Telekom suggests a strategy"crucially que be"almost entirely guided by the cost control". And to plead for "a radical transformation plan" operator.

If René Obermann is "a credible successor, wait not major changes", but prevents Dresdner Kleinwort. The choice of an internal recruitment argues in this sense.

Lack of growth in Germany, pressure on profitability, reduction costs limited, this cocktail reduced visibility over the long term. About 20 of the analysts following value are purchase while only about one-third are for sale. UBS judge the high increase that has known the title since this summer "is not deserved and makes the vulnerable action."

Valued about 15 times the benefits expected for 2006 and 2007, "it offers a premium to its peers that is not justified, says Lehmann Brothers." At the current price, the "T" action is already above the objective of the majority of analysts. But Klaus Zumwinkel, Chairman of the Supervisory Board, made clear to the new CEO what it expected of him: "It is to climb the course and the market capitalization in the long term." However, without new strategic plan, the welcome given to René Obermann market rating could quickly fade.