Thomas Dannenfeldt, Deutsche Telekom’s chief financial officer, made no secret of his unhappiness as early as two weeks ago.
“We are not satisfied with the business in Poland,” Mr. Dannenfeldt said when presenting the company’s half-year results.
And no wonder – the number of T-Mobile customers with contracts surprisingly sank by another 60,000 in Poland in the second quarter and sales collapsed by 10 percent in the first six months, in an important European market.
Mr. Dannenfeldt has already announced a price offensive to win back customers.
But according to information received by Handelsblatt, there will also be consequences for the T-Mobile Poland chief executive, Miroslav Rakowski, who will be removed for mismanaging the business.
A Deutsche Telekom spokesperson responded to Handelsblatt by saying the telecom company would not “take part in speculation about personnel.”
With €1.6 billion in sales, Poland is one of the bigger European markets for Deutsche Telekom. Just a few months ago, the telecommunications company acquired the Polish broadband provider GTS to attract new business customers with both wireless and landline service.
As it has in the past, Poland will again become a test market for new products. Deutsche Telekom tried out a new digital commerce product called “My Wallet” in the country at the end of 2013 before introducing it in Germany the following spring.
But the German carrier cannot afford situations like the one in Poland right now.
The weak business in Europe, for which board member Claudia Nemat is responsible, has long been a problem. In the first half of the year sales dropped 7 percent, and the adjusted operating profit (EBITA) fell by 4 percent.
Ms. Nemat has promised for more than a year to reverse the trend, but a turnaround has yet to materialize. She has offered as an explanation the economic crises gripping many countries in Europe and regulatory rulings that have harmed operators.
The Deutsche Telekom CEO, Timotheus Höttges, has complained for a long time about the carrier's destructive organizational “silo mentality.”
But the business in Europe has been weakening for a long time, and that cannot make Deutsche Telekom chief executive Timotheus Höttges happy. He wants to refocus the carrier on the European continent, where the business is consolidating. An important project is building a pan-European, Internet-based network.
Taking the reins
So Mr. Höttges is taking the reins. The management consulting firm McKinsey is working with Deutsche Telekom to find saving. The program called “Best” is expected to pool existing cost-cutting efforts and develop new ones.
Mr. Höttges and Mr. Dannenfeldt want to reduce costs by about €3 billion by 2018, by in part restructuring its IT business T-Systems. How much tighter the screws will be tightened is unclear.
“The project is in its early phase,” according to a Telekom spokesman. “Nothing has been decided.”
The emphasis on savings will likely focus on administration, marketing, financial control and management costs. Deutsche Telekom managers admit internally that despite past efforts to become more efficient, there is still too much duplication.
Mr. Höttges has complained for a long time about the organizational “silo mentality” in the company with lengthy and tortured decision-making. This affects other divisions, such as Romania, Croatia, Austria and Poland, which are now under the microscope.
“If we have a pan-European network, do we still need all of the operations in each country?” asked a Deutsche Telekom executive who declined to be named. Country chiefs, such as Mr. Rakowski in Poland, are likely to lose power and influence.
But a simpler leadership structure suits Mr. Höttges. The headquarters in Bonn could more quickly dictate common strategies across the group. This is already taking place by setting technical standards.
Deutsche Telekom across Europe has been using five different TV platforms. In the future, there will be just one, plus a second, less expensive version.
“When a standardization fails to be implemented, then for me, fun time is over,” Mr. Höttges said in a recent Handelsblatt interview.