DT Shakes Up Management at Dutch Operation

Deutsche Telekom has announced a management shake-up at T-Mobile Netherlands after reports that efforts to sell the ailing Dutch business fell through and as competition grows fiercer.

Current T-Mobile Netherlands CEO Mark Klein is leaving the Deutsche Telekom AG (NYSE: DT) Group to become chief digital officer of German insurance company ERGO.

While the German telecom incumbent has yet to identify a CEO replacement, it has appointed Martin Knauer as head of the Dutch consumer business. Knauer currently runs Congstar, Deutsche Telekom's low-cost mobile brand in Germany, but will take up his new role on July 1, replacing Marco Kind as consumer boss.

The move comes weeks after Deutsche Telekom unveiled details of a new strategy for the Dutch business that has been closely modeled on the approach taken by T-Mobile US Inc. , which has been luring customers to low-cost deals under the flamboyant leadership of John Legere. (See T-Mobile Gives Customers Shares, Updates on 5G, LTE-U.)

Given his background at low-cost Congstar, Knauer may be under pressure to spearhead a Legere-like revolution in the Dutch consumer market, where T-Mobile has been hemorrhaging mobile customers to KPN Telecom NV (NYSE: KPN), Vodafone Netherlands and more recent market entrant Tele2 Netherlands Holding NV .

In the first three months of the year, the operator's mobile customer base shrank to about 3.67 million subscribers, from 3.83 million in the year-earlier period. Revenues fell from €346 million ($388 million) to €324 million ($364 million) over the same period, with EBITDA dropping from €133 million ($149 million) to €88 million ($99 million).

Earlier this year, Deutsche Telekom was reportedly in talks to sell T-Mobile Netherlands to private equity buyers, but it appears to have abandoned those plans after being disappointed by offers. (See Eurobites: EE Bows Out With a Whimper.)

As a result, it is now trying to revive the Dutch business by mimicking the strategy that has brought success for T-Mobile US, which Deutsche Telekom has similarly been unable to offload.

Critics have argued that both operations look incongruous with the rest of the Group, which has been trying to develop fixed and mobile capabilities in its various markets. T-Mobile US has always lacked a major fixed-line business and T-Mobile Netherlands sold broadband division Euronet in late 2013, just weeks before current Deutsche Telekom boss Timotheus Höttges took up the CEO role.

The operator may have come to regret that move given the recent spate of M&A activity aimed at creating service providers with "quad-play" capabilities. In the Netherlands, cable operator Liberty Global Inc. (Nasdaq: LBTY) and Vodafone agreed in February to merge their fixed and mobile operations to avoid losing out to KPN in the growing market for such bundled offerings. (See Vodafone, Liberty Global Form Dutch JV.)

Deutsche Telekom may have a hard time justifying its "Mobile First" strategy in the Netherlands while its other subsidiaries continue to promote packages of fixed and mobile services. Given fierce levels of mobile competition, with four network operators serving a market of about 17 million people, any efforts to compete on pricing could also backfire. Moreover, T-Mobile Netherlands has previously drawn criticism for lagging KPN and Vodafone on the early rollout of 4G services.

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Deutsche Telekom is making a number of other management changes at T-Mobile Netherlands as it tries to get the operator back on its feet.

Rachid El Hattachi will replace Lampros Iskos as the Dutch operator's chief technology information officer, having previously worked as Deutsche Telekom's senior vice president of technology, architecture, innovation and engineering. Iskos is apparently pursuing career opportunities in Greece outside the Deutsche Telekom Group.

The operator is also parting company with Freddy Djikman, who has been CFO at T-Mobile Netherlands since 2012. Robert Jelinek-Nacke, the vice president of free cash flow and operating working capital, will assume CFO responsibilities for six months until a permanent replacement has been found.

Deutsche Telekom did not provide any indication of the future plans of Djikman or consumer boss Marco Kind.

"We have a clear commitment to make T-Mobile Netherlands a successful growth engine in the Dutch market," said Claudia Nemat, Deutsche Telekom's Europe and technology chief, in a company statement. "I am confident that the new executive members will lead our customers into the mobile digital age with the best customer experience."

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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