Broadband ruling blow for troubled Telekom boss

Click to follow

The European Commission backed German efforts to open up Deutsche Telekom's new high-speed broadband network to rivals yesterday, piling further pressure on the company's beleaguered boss.

Kai-Uwe Ricke, the chief executive of Deutsche Telekom, which owns T-Mobile, faces growing pressure from investors who are unhappy about the company's recent performance and the fall in its share price.

Speculation has mounted in the German press that some of the company's shareholders, including the US private equity firm Blackstone, do not want to extend Mr Ricke's contract, which is due to expire in November 2007. The chief financial officer, Karl-Gerhard Eick, reportedly harbours ambitions to step up to the top job. The company said a decision on whether to extend Mr Ricke's contract can be made this November, and declined to comment further. Third-quarter results are due to be published on 9 November.

The German government is also thought to be unhappy with the way Deutsche Telekom's share price has dropped, and expects the company to present a strategy to improve profitability. The government holds a 31 per cent stake in the group.

Earlier this month Deutsche Telekom slashed its earnings and sales forecasts for this year and next as second-quarter results came in short of expectations. The group has been hurt by competition and is cutting prices, costs and investments.

It was dealt a further blow by the European Commission's endorsement of German regulators' proposals to allow rivals to use Deutsche Telekom's broadband networks, which the Commission hopes will lower prices for subscribers. The German government had tried to exempt Deutsche Telekom from competition for a limited period, with the company threatening to stop its €3bn (£2bn) investment in a high-speed network in 50 cities.

A spokesman did not rule out opening the Deutsche Telekom network to rivals as long as it is able to charge realistic wholesale prices. The company controls about 60 per cent of the German broadband market.

Viviane Reding, the EU's information society and new media commissioner, lambasted the country for dragging its heels in opening up the broadband market. "While bitstream access is already available to new market entrants in the vast majority of EU member states, it has taken the German regulator more than three years since the entry into force of the EU telecom rules to take the required measures," she said.

But the Deutsche Telekom spokesman argued that, according to EU data, the German broadband market is showing one of the fastest growth rates. "The demands of Ms Reding are a classic case of over-regulation," he said.

Comments