Reinhard Clemens

Deutsche Telekom's Tremendous IT Challenge

main 42416181 Christian Charisius DPA – Reinhard Clemens Deutsche Telekom board member head of IT subsidiary T-Systems 2015 CeBIT trade fair
Reinhard Clemens is internally known as Mr. 72 Percent, because staff only received 72 percent of variable pay last year as T-Systems missed its 2016 targets. Source: Christian Charisius / DPA

Deutsche Telekom’s biggest headache is not going away. In fact, it has gotten worse. Its subsidiary T-Systems, which operates computers, networks and software for corporate clients, has run up losses totaling almost €4 billion over the past decade. That includes an operating loss of €330 million ($361 million) last year alone.

For Europe’s largest telecoms group in terms of market value, the success of its IT business (or lack of it) matters for the whole. T-Systems made up more than a 10th of Deutsche Telekom’s 2016 revenue of €73.1 billion and its ongoing struggles have become an increasing source of  frustration for the German firm’s supervisory board, which has the power to hire and fire executives and decide on strategy changes.

The situation is dire enough that heads at the top may be about to roll, according to Handelsblatt’s sources, and there’s even speculation of a merger to stem the bleading. T-Systems Chief Executive Reinhard Clemens in an interview insisted the board still backs his strategy, and pleaded for more time to turn the firm around.

“The business must become profitable. Period. And at the present time it is not, this is no secret. But we have a strategy,” he told Handelsblatt.

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