Internet tycoon challenges Deutsche Telekom to team up on German broadband

FRANKFURT (Reuters) - The billionaire founder of United Internet has urged internet providers to found a joint company to build out Germany's high-speed broadband network, challenging market leader Deutsche Telekom to back the venture.

Ralph Dommermuth said industry should take the lead on laying the glass fiber network in Germany, where just 2.5 percent of households are directly hooked up to such ultra-fast connections - less than in other developed nations.

Responding, Deutsche Telekom said Dommermuth's proposals had come months after it and half a dozen other companies had already proposed teaming up to build out Germany's glass-fiber network.

The new government formed by Chancellor Angela Merkel has pledged to back broadband investments to the tune of 10-12 billion euros over the course of this parliament as part of an effort to create a 'Gigabit society' by 2025.

That amount, Dommermuth said in an interview with newspaper Welt am Sonntag, would only cover a fraction of the overall cost of providing nationwide glass-fiber coverage that he estimated at 80 billion euros.

German business groups have already cautioned that under-investment in connectivity threatens to sap its export competitiveness as manufacturing processes become increasingly automated.

"Each telecommunications company that wants to participate in this alliance would contribute capital according to its market share," said Dommermuth, a self-made businessman whose fortune is estimated by Forbes magazine at $6.4 billion.

If companies paid in 10 billion euros and a further 10 billion came in the form of state subsidies, it would be possible to borrow a further 10 billion euros, Dommermuth said, creating an overall investment pot of 30 billion euros.

United Internet would be willing to chip in 1.4 billion euros in line with its 14 percent market share, he said, adding Deutsche Telekom's participation would be "critical".

Responding, Deutsche Telekom said it had proposed such an alliance last September - together with glass fiber players wilhelm.tel, Deutsche Glasfaser, M-Net, Stadtwerke Neumuenster, Net Cologne and Ewetel.

"United Internet should stop all this talk and finally pick up a shovel," Telekom said in a statement. Its invitation to United Internet's 1&1 remained open.

(Reporting by Douglas Busvine; Editing by Clelia Oziel and Mark Potter)