Deutsche Telekom AG is to upgrade its Datex-J text-based system to turn it into a full-scale on-line service to be called Telekom Online. It revealed yesterday that it has been working with Microsoft Corp and IBM Corp to create a Windows front end and offer its 700,000 subscribers access to the Internet and the most comprehensive service of German-language computer services ranging from home shopping to on-line publications, including leading German magazines. It also wants a close alliance with a US service and is leaning towards the Microsoft Network, but is also talking to AT&T Corp’s Interchange. It will offer the access software free to Datex-J users, and subscription will be about $5 a month.