INTERVIEW-Deutsche Telekom backtracks on German investment plan

Wed Sep 28, 2011 2:12pm EDT

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* Declines to confirm 10 bln eur investment plan in Germany

* Says to reveal more capex efficient plans

* Says company has Plan B if T-Mobile/AT&T merger falls through

(Adds detail, background, more comments)

By Leila Abboud and Marie Mawad

PARIS, Sept 28 (Reuters) - German telecoms group Deutsche Telekom (DTEGn.DE) is reconsidering its 10 billion euros ($13 billion) investment pledge in Germany and will announce new plans, its Chief Technology Officer told Reuters.

"We are now to reveal our plans to be much more capex efficient. It's a mix of price reductions from the vendors, better engineering in terms of network architecture and being more selective on our investments," Olivier Baujard said on the sidelines of the Broadband World Forum conference in Paris on Wednesday.

He declined to confirm the company's previous target to invest 10 billion euros in German infrastructure in 2010-2012 and said: "We are judged by the market on our capacity to generate cash flow that will serve to pay dividend."

"We are fighting against a decline of the top line, so something has to change. Either we can reverse it, but in the short term given the (economic) context it is a very unlikely possibility, or we have to shrink the costs," Baujard said.

Asked about whether he believed Deutsche Telekom's sale of its U.S. business T-Mobile USA to AT&T (T.N) would close, Baujard said that "we believe that the T-Mobile US deal will go through."

The planned exit from the United States is key to the company's strategy to strengthen its German business by investing in its network while seeking growth in emerging markets of Eastern Europe.

The operator had also planned to plow some of the $39 billion from the T-Mobile deal into share buybacks as a way of rewarding shareholders after years of declines in it's share price.

Deutsche Telekom sees the current stance taken by US regulators to block the deal on the grounds that it would be bad for consumers and discourage operators from improving their networks as a "hardball negotiating tactic", said Baujard.

However, he also said that any rational company had a Plan B and that Deutsche Telekom had other opportunities for its U.S. operations should the U.S. Department of Justice succeed in terminating the deal.

Deutsche Telekom agreed to sell its U.S. unit to AT&T for $39 billion in March and has called the $6 billion break up fee it would receive should the deal fail its Plan B.

Baujard declined to say specifically what scenarios Deutsche Telekom was weighing for T-Mobile, which has long struggled to compete with larger rivals Verizon Communications (VZ.N) and AT&T that have more financial firepower to spend on everything from faster mobile networks to high end smartphones.

"For us the main problem would be how can we keep T-Mobile competitive in the mobile data race," he said.

"It's not as if we have no other opportunity than to close T-Mobile USA if the deal doesn't work. We have other opportunities. (T-Mobile USA ) may not be an economical jewel, but it is a true asset that has many ways to be valued," Baujard said.

($1 = 0.735 Euros)

(Writing By Nicola Leske; Editing by Elaine Hardcastle and Hans-Juergen Peters)

((Nicola.Leske@thomsonreuters.com)(+49 69 7565 1214)(Reuters Messaging: nicola.leske.thomsonreuters.com@reuters.net)) Keywords:

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