Telekom faces shareholder fury

Shareholders want a plan to improve shareholder value

The German telecom giant Deutsche Telekom faced thousands of angry shareholders at its AGM on Tuesday.

The company has come under fire from shareholders who have watched the value of their holdings sink about 70% in the past year.

The company's chairman and chief executive Ron Sommer opened the annual meeting in a conciliatory mood, expressing regret for shareholders' plight.

Ron Sommer: Regretful

"I sincerely regret the impact this has had on you," Mr Sommer said at the meeting in a sports and concert arena in Cologne.

He said the share slide was "absolutely unsatisfactory" but added that it did not reflect the "first-class position and commercial success of our enterprise".

The stock continued to fall on Tuesday, trading 1.63% lower at 25.87 euros by 1005 GMT.

Management 'errors'

In a partial privatisation, Deutsche Telekom floated its shares in three tranches in 1996, 1999 and 2000.

About one third of the company is now owned by private shareholders. The German state holds a 58% stake, which is set to fall to 46% after the company closes its acquisition of Voicestream Wireless of the US.

I will do my utmost to ensure that our company's full potential and prospects are realised

Ron Sommer
Deutsche Telekom

Germany's Association for the Protection of Small Shareholders blames the share slide on a "long series of errors by management".

The shareholders - some of whom believe they were misled about the value of the company - are now looking for a clear strategy to lift the shares out of the doldrums.

"I will do my utmost to ensure that our company's full potential and prospects are realised," said Mr Sommer at the meeting.

He also promised to improve the company's operational profitability in 2001 and "years to come".

Sales

Last month Deutsche Telekom reported a first-quarter net loss of 400m euros ($359m; £249m) in line with market expectations.

Sales were up 16% at 11.1bn euros.

At the meeting Mr Sommer said that he expects group sales in 2001 - excluding the planned acquisition of Voicestream Wireless and Powertel - to increase 15% on the previous year.

Both acquisitions are expected to close on Thursday.

The company also plans to dispose of assets this year, including stakes in Sprint, regional cable assets in Germany and real estate.

Fraud allegations

Mr Sommer is currently facing a criminal investigation for possible fraud.

In February, Deutsche Telekom was forced to revise downward the value of its real estate portfolio.

As a result Mr Sommer and his fellow directors are being probed by prosecutors to see if there was an attempt to falsify the accounts.

"I am confident that the investigations by the district attorney, which were necessitated by the reporting of an offence, will prove the accusations to be unfounded," said Mr Sommer at the AGM.