Deutsche Tel to cut debt to $50bn

Sommer: Blamed for Deutsche Telekom's huge debt and plunging stock price

FRANKFURT, Germany (CNN) -- Deutsche Telekom, Europe's biggest phone company, saw its stock rise on Friday after interim Chief Executive pledged to trim its debt and said first-half results were in line with forecasts.

"The results lie within the range of expectations," Helmut Sihler told the Frankfurter Allgemeine Zeitung newspaper. "They prove that the core business of Telekom is running properly. We had a good first half."

Its stock (FDTE), which has fallen about 50 percent this year, rose 3.1 percent to 10.98 euros in early Frankfurt trading on Friday. Two year ago, the stock hit a high of $104. Its subsequent decline has been blamed on former chief executive Ron Sommer's expansion plans, which have left the former German monopoly with debts of 67 billion euros.

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Analysts polled by Reuters expect the debt-laden company, which ousted Sommer a month ago, to post second-quarter earnings before interest, tax, depreciation and amortisation (EBITDA – a measure of a debt-laden company's ability to make money) of 3.99 billion euros ($3.91 billion), against 3.6 billion a year earlier.

Second-quarter adjusted EBITDA is forecast to be in a range from 3.8 billion euros to 4.3 billion euros and average forecast for the group's net loss was 1.3 billion euros.

MORE STORIES • Sommer resigns from Telekom  • VoiceStream in U.S. merger talks  • Debate over Sommer intensifies

Sihler said the company's cost cutting programme, which includes cutting 22,000 jobs over the next three years, would save billions of euros and it would cut its debt mountain to 50 billion by the end of 2003.

A promise Sommer had made but wasn't able to see through as his hold on power became a political football in the country's election in September.

Sommer's expansion into the U.S. mobile phone business was instrumental in his downfall as Voicestream and Powertel continue to bleed cash. On Wednesday, Voicestream and Powetel posted EBITDA of $156 million in the second quarter, up 50 percent from the first three months of the year.

Analysts have said the Voicestream business, which is ranked as the sixth and smallest mobile phone operator in the U.S., has little chance on improving on that position unless it merges with a bigger rival like AT&T Wireless (AWE) or Cingular.

Sihler did not comment on the search for a Voicestream partner. "The starting point should be that with Voicestream we have a business which is developing positively," he said.

He also said no permanent replacement for Sommer had been found and the company would make public the results of a strategic review along with its third-quarter results in November.

"That could then coincide with a clarification of the CEO successor question," he told the paper.

"I would not like to choose between a restructuring CEO and a visionary one... A good manager should be able to restructure when necessary. And a good manager must be able to look ahead," he said.

Sommer's plans to sell Deutsche Telekom's cable television business to Liberty Media (L), the media conglomerate controlled by cable pioneer John Malone, for 5.5 billion euro earlier this year fell apart after Liberty said it was unwilling to meet regulator demands to upgrade the network.

But on Thursday, the company said it had not ruled out another bid at lower price and as part of a consortium.

"We are looking at the German systems with some other players, said Liberty Chief Executive Robert Bennett. "So we may well be back as part of a consortium and at a different price range."

Deutsche Telekom said it has received offers of more than 3 billion euros for the business and binding offers are expected by the end of September.