The future of Europe’s telecommunications industry suggests Deutsche Telekom AG (DTE)’s plan of handing the chief executive officer’s job to its finance director may hinge more on wringing out cost savings than on innovation.
At the end of 2013, Rene Obermann will step down from Germany’s largest carrier, to be succeeded by chief financial officer, Timotheus Hoettges.
Since the meeting was private, a person familiar with the matter anonymously suggested regulators rethink rules that govern a shrinking industry, and the 49-year-old Obermann expressed frustration with efforts while explaining the decision to the supervisory board.
Deutsche Telekom (News - Alert) and European peers such as France Telecom SA (FTE) have been hurt by authorities slashing the fees it can demand for calls terminated on its networks. A move that would help reduce spending on more expensive fiber-optics connections, the most recent disagreement with Germany’s network regulator centers on the Bonn-based carrier’s push to win the rights to offer faster Internet services on existing copper wires.
“Under Obermann’s leadership the company hasn’t really been able to reinvent itself within an industry that is performing very poorly. It seems that innovation ideas weren’t the solution and now it’s time to focus on seeking more efficiency,” said Francisco Salvador, a Madrid-based strategist at FGA/MG Valores.
Before fully taking over from Obermann in 2014, 50-year-old Hoettges will assume the additional role of deputy CEO in January. Deutsche Telekom, under Hoettges, reached a three-year, $ 5.5-billion cost-cut target ahead of schedule.
Through the merger of the internal computing and communications systems into a T-Systems (News - Alert) unit, a new goal of $ 1.3 billion in savings by 2015 was then set out by him. This month, a person familiar with the matter said Hoettges also wants to reduce some of the 12,000 staff in Germany who perform internal control functions such as measuring business processes.
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Edited by Braden Becker