Editor’s letter

“A culture of no bullshit.” That is what Kai-Uwe Ricke, the new chief at Deutsche Telekom, promised at a conference in mid-March.

But what does he really mean?

The main problem over at Deutsche Telekom is the debt mountain, which is still more than €60 billion. The German phone operator has given a commitment to reduce debt to three times its earnings by the end of this year and through his statement Ricke seems to be pinning his credibility on that pledge.

But Ricke’s debt reduction strategy looks like it depends on the company increasing revenues as much as reducing its actual debts.

If Ricke really wants to know what “no bullshit” means to bondholders, maybe he should take a look at France Télécom. The French phone operator recently grabbed the bull by the horns and launched a €15 billion rights issue in March that made its German rival’s debt reduction plans look distinctly meagre. And after the disposal of its Italian subsidiary, Wind, France Télécom’s debts are now roughly €46 billion – lopping almost a third off last year-end’s figure.

Deutsche Telekom has managed to complete a mandatory convertible bond, which for all intents and purposes is a back door rights issue, but at only €2.3 billion it pales beside France Télécom’s.

So while both Ricke and his company’s commitment to debt reduction is reassuring, analysts and investors might well point out that actions speak louder than words.

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