Deutsche Telekom Names New CEO

The Associated Press
Monday, November 13, 2006; 7:57 AM

FRANKFURT, Germany -- Deutsche Telekom AG named Rene Obermann, the head of the company's T-Mobile wireless division, as its new chief executive on Monday.

Europe's biggest telecommunications company by sales announced the decision following a meeting of its supervisory board and after CEO Kai-Uwe Ricke tendered his resignation after four years in the top job.

The Bonn, Germany-based company said in a statement its supervisory board decided to appoint Obermann as chief executive officer, effective immediately.

Shares of Deutsche Telekom rose nearly 3.6 percent to 13.58 euros ($17.47) in Frankfurt after the decision was announced.

Klaus Zumwinkel, chairman of the supervisory board, which is the equivalent of a board of directors, said Obermann, 43, would serve well in keeping costs contained and moving the company forward.

"Rene Obermann is a strong entrepreneurial leader with over 20 years experience in an industry that is characterized by fast technological changes and constant new challenges in the market," he said. "His career has a strong international influence, particularly through the successful internationalization of T-Mobile. Customer focus and service are of high priority to Obermann. At the same time, he will continue managing costs effectively."

T-Mobile has been one of Deutsche Telekom's bright spots, mainly through strong growth in the U.S. in recent years. While with T-Mobile, Obermann helped cut expenses there by 1 billion euros ($1.3 billion) and oversaw the elimination of 1,500 jobs.

But analysts wondered if Obermann, who was often viewed as a protege of Ricke, would face similar scrutiny as the company seeks to stem its falling profits and lagging sales in face of increased competition in Germany and elsewhere in Europe.

"Obermann, like Ricke, was CEO of T-Mobile before taking on the top position. The supervisory board reasons that the choice of Obermann will secure continuity," said Dan Bieler, research director for London-based Ovum, a technology consulting group. "Why replace the CEO if you are looking for continuity? We would have thought that a conscious choice for discontinuity would be behind such a move."

Obermann, who previously worked at BMW AG and founded the business ABC Telekom in Muenster in 1986, joined Deutsche Telekom in 1998 as managing director of sales of T-Mobile Deutschland.

He was CEO of T-Mobile Deutschland from April 2000 to March 2002. In June 2001, he joined T-Mobile International's board and was responsible for European operations.

Ricke was the second high-profile German CEO to be ousted from his job in a week. On Tuesday, carmaker Volkswagen AG announced that CEO Bernd Pischetsrieder, 58, who was given a contract extension in May through 2012, would leave the company on Dec. 31. He will be replaced by Martin Winterkorn, the head of VW's luxury car unit Audi AG.

Deutsche Telekom gave no reason for Ricke's resignation on Sunday. Analysts said he had lost support from the board and several major shareholders, including the German government and private equity group Blackstone.

Ricke, whose father had previously been CEO of the state-owned Deutsche Telekom, has been under intense pressure from domestic rivals for traditional phone line business, as well as for high-speed Internet connections and cell phone services. He announced a program last year to cut as many as 32,000 jobs by 2008.

Deutsche Telekom has been losing customers to rivals such as Arcor and Mobilcom, which offer lower prices for traditional telephone services bundled with high-speed Internet access.

From July to September, the company said it lost half a million landline connections, leaving it with 52.3 million customers _ down 5.8 percent from the year-ago period. In the third quarter, earnings fell 20 percent to 1.94 billion euros ($2.5 billion), as sales rose 2.8 percent to 15.48 billion euros ($19.91 billion).


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