Deutsche Telekom's chief executive officer, Mr Ron Sommer, antagonised his shareholders yesterday by describing Telekom shares, down from a high of € 100 to less than €12, as a "bargain".
Mr Sommer faces a hostile annual general meeting tomorrow after it was revealed that he and other leading Deutsche Telekom executives received bonuses of €17.4 million in 2001. That represents an annual increase of 90 per cent, despite record losses and a tumbling share price.
Yesterday, Mr Sommer said the company would cut 22,000 jobs over the next two years, blaming "enormous competitive and governmental pressure".
Mr Sommer remained on the defensive in characteristic fashion yesterday, blaming market analysts for talking down Telekom's market value.
Another reason for the company's poor showing, he said, was because the telecoms sector had fallen out of fashion on markets. "The markets have punished many companies worldwide that were still stars yesterday," he said in Germany's Bild am Sonntag newspaper.
"I never would have thought that you could buy Telekom shares so cheaply when the company is so strong."
The company, two-fifths owned by the German government, has debts of some €67.2 billion, the largest of any major European telecoms company.
It hopes to sell off non-core divisions to reduce its debt and yesterday Mr Sommer said the long-planned sell-off of cellular division T-Mobile would still go ahead.
"We cannot control the stock market. Until the standing of Telekom shares improves markedly, we will leave things be," he said.
The company's larger-than-expected losses and executive bonuses are likely to dominate tomorrow's annual meeting in Cologne.
Mr Sommer will face the wrath of thousands of small-time investors who have watched their savings vanish just seven years after they invested in Telekom, the first example of popular stock market dabbling in Germany.
They are furious that their dividends have been cut from 62 cent to 37 cent per share, while the top executives voted to almost double their salaries.
"It's obvious that the company has gouged its shareholders and sacrificed trust," said one senior politician yesterday.
But Mr Sommer was unrepentant at the decision yesterday.
"None of us need to be red-faced. We increased executive salaries in line with market levels," he said.
"But the salaries are success dependent. If we don't reach our targets in 2002 the bonus will be considerably lower."
Last week, the company announced first quarter losses of €1.8 billion. And with projected losses this year of a record €5 billion, shareholders will, not for the first time, be calling for Mr Sommer's resignation tomorrow. But the chief executive officer has no plans to depart, saying he would only leave the company "if I am of the opinion that I lead the company in the wrong direction".
