20.6bn euro loss for Deutsche Telekom

Deutsche Telekom capped a disastrous year for Europe's telecoms industry yesterday when it unveiled the biggest loss in German corporate history.

Losses of 20.6bn euros (£13bn) in the third quarter forced the cancellation of this year's dividend payment to shareholders and the announcement of cuts to capital spending.

Deutsche Telekom's plunge into the red was a result of writedowns against wireless assets and licences, especially in the US, but Kai-Uwe Ricke, the chief executive appointed only yesterday, pledged rapid action to slim down the 64bn euro debt.

"Our future lies in debt reduction and growth. This is the only way for us to bring about a sustained improvement in our results. A politician has 100 days in which to make his mark. I will move faster."

Mr Ricke could face opposition from powerful trade unions who are unlikely to accept meekly plans to cut about 55,000 jobs.

On the stock market in Frankfurt, shares which at one stage had lost 90% of their value closed almost 5% higher on the day.

"There is nothing that can depress the stock anymore," said one German fund manager. "The balance sheet has been cleaned up and now the new CEO can take over and restart Telekom's business."

The news from Deutsche Telekom came hours after Allianz, Europe's leading insurer, reported that losses of 2.5bn euros in the third quarter. It wrote down investments by 1.9bn euros while Dresdner Bank, bought last year, lost 972m euros.

Allianz expected to be able to maintain the dividend payout but refused to forecast profits "as a result of high volatility and uncertainty about the impairments on investments".

Asbestos-related claims in the US and this summer's flood damage in central Europe also hit Allianz's profits though the chief executive, Henning Schulte-Noelle, cheered investors when he said: "The low point should be behind us."

The latest round of corporate earnings reporting has already seen Commerzbank, Germany's third largest quoted bank, report a net loss of 129m euros on the back of investment writedowns and rising bad debt provision.

The chemical and pharmaceuticals sector provided a bright spot in the gloom when BASF reported an 80% increase to 591m euros in third quarter net operating income before special factors. That followed better third quarter earnings from Bayer earlier in the week, though the latter's results were overshadowed by an admission that it might be prepared to surrender control of the struggling pharmaceuticals operation.

Despite the improved results, BASF's chairman, Dr Jürgen Strube, was bleak in his assessment for the German economy. Production and labour costs were rising compared to other countries and he was scathing about the government's failure to launch badly needed reforms.

"Instead of reorganising the social security system, simplifying the tax system, reducing the share of state-owned companies and decreasing non-wage labour costs, it appears that the government's aim is to further increase taxes for citizens and business," he said.

Rolf Elgeti, head of equity strategy at Commerzbank Securities in London, said the key factor for investors was not so much the results as the uncertainties about the outlook for corporate Germany. These were being compounded by higher taxation and disappointment at the lack of reforms."The uncertainties are huge for both companies and consumers and that is not helping demand," he said.