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Deutsche Telekom's CEO Quits

Kai-Uwe Ricke has quit as CEO of Deutsche Telekom AG (NYSE: DT) with immediate effect, ending months of speculation and behind-the-scenes maneuvering, the carrier announced Sunday. (See DT's CEO Resigns.)

In an official statement, Europe's largest operator said Ricke, who became CEO in November 2002, resigned "in the interests of the company and in agreement with the Supervisory Board."

That 21-strong Board met today to name 43-year-old René Obermann, CEO of the carrier's wireless business, T-Mobile International AG , as his successor.

"René Obermann is a strong entrepreneural leader with over 20 years experience in an industry that is characterised by fast technological changes and constant new challenges in the market," says the chairman of the Supervisory Board, Dr. Klaus Zumwinkel, in a prepared statement.

"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 to managing costs effectively."

News of Obermann's appointment lifted the carrier's stock by €0.34, 2.6 percent, to €13.48 (US$17.26) by mid-afternoon Monday.

Lehman Brothers analyst Graeme Pearson welcomed the news, though with a hint of caution. Obermann, he notes in a research note, is "younger [Ricke is 45], much more dynamic, and is already popular with investors."

However, "the market would have probably preferred an external candidate and will be aware that Obermann has presided over the disappointing performance of T-Mobile over the last few years, particularly in Germany," adds Pearson. "Obermann's challenge will be to execute on the newly disclosed cost cutting and asset disposal programmes."

Ricke's resignation ends months of speculation, during which Deutsche Telekom's Supervisory Board is believed to have drawn up a "wish list" of potential replacements that included the CEO of BT Group plc (NYSE: BT; London: BTA), Ben Verwaayen. (See Does Deutsche Telekom Want BT's Boss?)

Ricke has been under pressure for months following disappointing financial results and a slide in the carrier's share price. DT's stock closed at €13.14 ($16.87) on the Frankfurt exchange last Friday, down 10 percent from €14.57 ($18.70) a year ago. In contrast, the DAX index, which tracks Frankfurt's 30 largest stocks, has risen by about 25 percent during the past year.

The carrier, which recently outlined a new strategy called Telekom 2010 aimed at stimulating growth and boosting market share, last week announced a fall in third-quarter net income of about 20 percent, to €1.95 billion ($2.50 billion) from €2.44 billion ($3.13.billion) a year earlier. It also outlined a new cost-cutting program that will save DT €2 billion ($2.56 billion) in 2007. (See DT Reports 3Q06 and DT Outlines 'Telekom 2010'.)

One of the main sources of pressure on Ricke has reportedly come from The Blackstone Group , which acquired a 4.5 percent stake in DT in April this year, and which has seen the value of its €2.68 billion ($3.45 billion) investment shrink more than 6 percent since then. (See Eurobites: No Let-Up on Euro M&A and DT Welcomes Blackstone.)

— Ray Le Maistre, International News Editor, Light Reading

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