September 10, 2018 / 11:07 AM / 11 days ago

Deutsche Telekom's IT services arm agrees to cut 5,600 German jobs

* T-Systems jobs deal averts the risk of industrial action

* CEO aims for savings of 600 mln euros

* Wants to return company to profit in 2020

BERLIN, Sept 10 (Reuters) - Deutsche Telekom’s loss-making IT services arm T-Systems said on Monday it had agreed with labour leaders to cut 5,600 jobs in Germany as part of CEO Adel Al-Saleh’s strategy to return the company to profitability.

The deal, reached after weeks of talks, marks a breakthrough for Al-Saleh, an American brought in at the start of 2018 to turn around a business that has long been the problem child of Europe’s largest telecoms group.

Job losses are smaller than the 6,000 originally foreseen by Al-Saleh out of T-Systems’ German workforce of 17,000, although a company spokesman said that several hundred staff had left in recent weeks.

“Now the way is clear to implement them,” the spokesman said, adding that first notices would go out to staff next week. Business daily Handelsblatt earlier reported the job cuts in its Monday edition.

Thomas Schneegans, head of the works council and a supervisory board member, told the newspaper that talks on the job cuts had taken three weeks before a deal was signed at the end of August.

Al-Saleh has given himself two years to turn around the 7 billion euro ($8.1 billion) company, whose top line is shrinking and margins are under pressure and which is leaking cash.

He wants to wean T-Systems off its reliance on classic IT outsourcing, and plough the 600 million euros ($694 million) in job savings into growth opportunities in digital and cloud services.

Under the deal, 3,765 jobs will go by the end of 2020 and, if the business is still struggling by then, a further 1,200 positions could be cut in 2021. T-Systems will cut the number of its offices in Germany to 25 from around 230 now.

It will also reduce its offshore headcount, and will in future only employ staff in Hungary, Slovakia and India. It eventually plans to ramp up staff numbers in India to 3,000 from 400 now. The company’s global headcount is currently 37,500. ($1 = 0.8640 euros) (Reporting by Nadine Schimroszik; Writing by Douglas Busvine; Editing by Thomas Seythal and Hugh Lawson)

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