UPDATE 2-CEO only top official in bribe probe-D.Telekom

* Says no other mgt or supervisory board members involved

* Says CEO Obermann not target of U.S. investigation

* Again rejects bribery allegations

* Group supports CEO, starts talks to extend contract-source

* Shares down 0.4 pct, lag flat sector index .SXKP

(Adds company starting talks to extend CEO’s contract)

FRANKFURT, Sept 15 (Reuters) - Deutsche Telekom DTEGn.DE said its Chief Executive Rene Obermann is the only top company official among the eight people facing investigation in a suspected bribery case in its eastern Europe operations.

In a show of support however, the company started negotiations this month with Obermann to extend his contract, which expires in November 2011, a person with knowledge of the matter told Reuters. Deutsche Telekom declined to comment.

Telekom’s top lawyer, Manfred Balz, said that Obermann was not the target of a U.S. investigation that triggered searches in Germany but was being questioned as a witness in the U.S. probe, Balz told a conference call, adding no other members of top management or the supervisory board were involved.

German prosecutors are investigating eight people including Obermann at the request of U.S. authorities who are looking into suspected bribery in Macedonia and Montenegro. [ID:nLDE68D25T]

The WirtschaftsWoche magazine reported on Monday that prosecutors searched Obermann’s home and confiscated documents last month as part of the investigation. [ID:nWEA7771]

A source close to the company confirmed this.

Balz said the case centred on suspicions that bribes flowed to politicians and officials in the two Balkan countries, allegations he said emerged only as searches in Germany began.

Obermann is accused of approving dividend payments to Macedonia's MakTel -- a unit of Telekom's Hungarian subsidiary Magyar Telekom MTEL.BU -- at a meeting with MakTel's CEO in 2005 on the condition that the Macedonian telecommunications market not be opened up to other competitors, Telekom has said.

“The public prosecutor’s office (in Bonn) is linking this to alleged bribery payments made by third parties,” it said.

Balz acknowledged the two CEOs had met but only for a chat.

“There was personal contact with the MakTel chief, but said this was simply a courtesy call. The man happened to be in Bonn ... Obermann had no influence at all on MakTel’s business policies,” Balz said.

Telekom has insisted it does not tolerate corruption even in regions where bribes are common practice.

“We are engaged from Croatia to Greece and it is well known that there are various levels of corruption there,” Balz said.

“It is clear that this region needs heightened management attention, especially in the compliance area.”

MakTel spokeswoman Verce Georgievska Rupic declined comment.

“Regardless of the fact that the investigation includes alleged bribery in Macedonia, we are not in a position to make any comment,” she said. (Reporting by Peter Maushagen in Frankfurt, additional reporting by Maja Zuvela in Sarajevo, Writing by Michael Shields; Editing by Mike Nesbit and Elaine Hardcastle)