Deutsche Telekom parts with chief executive

13th November 2006, Comments 0 comments

13 November 2006, Bonn, Germany (dpa) - Troubled German phone group Deutsche Telekom announced the sudden exit Sunday of chief executive Kai-Uwe Ricke, 45, whose four-year tenure saw a reduction in the company's debt and workforce but lost market share in Germany. Investors who had angrily watched Telekom's share price slump had been demanding Ricke's resignation. A statement to financial markets said that Ricke was leaving by mutual agreement with the supervisory board, effective Monday. A decision would

13 November 2006

Bonn, Germany (dpa) - Troubled German phone group Deutsche Telekom announced the sudden exit Sunday of chief executive Kai-Uwe Ricke, 45, whose four-year tenure saw a reduction in the company's debt and workforce but lost market share in Germany.

Investors who had angrily watched Telekom's share price slump had been demanding Ricke's resignation. A statement to financial markets said that Ricke was leaving by mutual agreement with the supervisory board, effective Monday.

A decision would be taken Monday on a successor. Sources at the telecommunications group said that Rene Obermann, a close associate of Ricke who currently heads the company's T-Mobile wireless division, had already agreed to accept the post.

Ricke was the second major German chief executive within a week to lose his job. On Tuesday, auto giant Volkswagen promoted a divisional head to replace chief executive Bernd Pischetsrieder.

Ricke has been under heavy fire over declining sales at the company's oldest and biggest division, the T-Com German fixed-line telephone system, as more agile competitors woo away customers with cheap rates. More than 1.5 million customers have left so far this year.

The group's main growth division is T-Mobile USA, which is under Obermann's aegis. It is signing up new American customers for its GSM digital wireless service, but the expansion effort is expensive for Telekom.

The German federal government, which owns one third of Telekom, has been under pressure from the number two shareholder, US-based investment fund Blackstone with 4.5 per cent, to stop the slide in the company's share price.

Insiders said that Ricke's departure became certain after Klaus Zumwinkel, who chairs the Telekom supervisory board, and the German federal government lost patience with the chief executive and backed Blackstone.

Sources said that Ricke's fate was sealed after a fierce argument late Tuesday with Zumwinkel, who is also chief executive of Deutsche Post.

Blackstone has been the toughest critic of Ricke, accusing him of doing too little to restore profitability, whereas labour unions at Telekom, concerned about possible layoffs, had mainly supported Ricke.

Taking over from Ron Sommer, a flamboyant chief executive who oversaw the company's privatization and ran up huge debts, Ricke retired some of the loans and negotiated retirement packages with trade unions to reduce Telekom's huge workforce.

But competitors were helping themselves to Telekom's German retail fixed-line business by offering cheaper rates. In August, Telekom downgraded its 2006 sales and earnings forecast.

On Thursday, Ricke insisted that the decline in German sales had been stopped and non-German sales were up.

Deutsche Telekom was formerly a German government department. After its flotation, it was for a time Germany's biggest company in market capitalization, but its share price dived as it accumulated debt and failed to defend its market share.

DPA

Subject: German news

0 Comments To This Article