Deutsche Telekom AG workers voted Thursday to strike over the group's tough cost-cutting program, plunging Europe's largest telecoms company into its biggest union battle since it was privatized more than a decade ago, reported dpa. The announcement by Germany's powerful service sector Ver.di union that its members had decided by a large majority to strike came as the former state monopoly reported a fresh slump in earnings. Ver.di said that over 96 per cent of those eligible to join the strike ballot had voted to down tools over Telekom's cost-cutting plans, which include shifting 50,000 workers to a new service company and reducing wages. The strike call followed the breakdown of talks between the union and Telekom, which is struggling to boost its earnings and competitiveness in the face of fierce competition in its domestic German market. Speaking ahead of the release of the strike ballot results, Telekom's chief Rene Obermann called on the union to lay aside the strike plans and to return to the negotiating table. "Strikes do not help anybody," said Obermann, who took over the chief executive job last November. But Ver.di officials said the strike action could start Friday. "We hope that the Telekom management comes to its senses quickly," said Lothar Schroeder, a member of the Ver.di board. The union's move follows five weeks of so-called warning strikes by Telekom employees over the cost-cutting plans. The decision to strike also followed warnings from Obermann about the fierce competition facing the Bonn-based company and the need for it to reform. Indeed, strong growth in the group's overseas operations and high-speed internet business failed to offset a further slump in its fixed-line customers in Germany with net earnings tumbling 58 per cent to 459 million euros (621 million dollars.) "A cut-throat price war is raging in Germany," Obermann told a press conference in Bonn Thursday. Analysts had expected first-quarter earnings would come in at about 770 million euros. Telekom has already undergone a major transformation over the last ten years after listing on the stock exchange in November 1996 and eliminating more than 100,000 jobs. But as part of the Obermann's drive to reduce costs, he wants to cut the group's current workforce of about 250,000 to 32,000 by the end of 2008. Underscoring the intense competition facing Telekom in Germany, Obermann said Thursday the group had lost 588,000 fixed-line customers to its rivals during the first three months of the year. "These figures show how enormous competition, and thereby the pressure to reform, is especially in the German fixed-line business," said Obermann. It is also a further sign of the competition that has taken shape in Germany's domestic telecoms market since liberalization of Europe's telecommunications industry in 1998 resulting in 90 per cent cheaper long-distance phone calls. Telekom, in which the German government still has a 32 per cent stake, confirmed its full-year earnings forecast of earnings before interest, tax, depreciation and amortization (EBITDA) coming in at 19 billion euros. The group said first quarter EBITDA fell 5.8 per cent to 4.682 billion euros from 4.970 billion euros a year earlier. Bonn-based Telekom's struggle to turn around its domestic German market was in stark contrast with a solid performance with its international operations, which now represents almost 50 per cent of its total revenue. Telekom's mobile phone unit T-Mobile gained about 2.8 million customers worldwide during the first three months, including 1.651 million new customers in Germany.
