Ricke is New Deutsche Telekom Boss

The board of Deutsche Telekom has ended months of speculation by confirming on Thursday that the head of its mobile operation, Kai-Uwe Ricke, is the telecommunications company's new chief executive.

The former state-owned monopoly can now officially pass the reins of power onto the son of past CEO Helmut Ricke and entrust him with revitalizing the heavily indebted German giant.

New chief starts work with 28 billion euro loss to recover

Deutsche Telekom recently posted results showing a 28 billion euro ($28.29 billion) corporate loss - the biggest in German history. Ricke's primary task will be to find ways of cutting the group's debt to 50 billion euros ($50.3 billion) from 64 billion by the end of next year.

"Deutsche Telekom's supervisory board has unanimously elected Kai-Uwe Ricke as the company's chief executive officer at today's meeting with effect from November 15, 2002," the company said in its official statement.

The meeting of the Telekom group's supervisory board at 0900 GMT at the company's central headquarters in Bonn approved the appointment of Ricke, ending an awkward hunt that had involved speculation and denial surrounding a number of managers from top German companies and others from abroad. The meeting was also convened to address the group's unhealthy third quarter figures.

Unanimous vote in favour by board hands mantle to Ricke

Representation at the meeting was made up mostly of employee members who currently command the majority on the board. Shareholder votes were reduced to nine due to the fact that caretaker chief executive Helmut Sihler's vote was suspended from affecting the final decision. In the end, it didn't matter as the motion was carried without hindrance.

Sihler took over as caretaker chief in July after former boss Ron Sommer was ousted after the company's share price collapse by 90 percent while Telekom was under his command. He will now return to his singular role as member of the board.

The new chief has many hard decisions to make in the coming months if he is to stabilize the corporate ship. Deutsche Telekom has been leaking money ever since Sommer rubber stamped the 34 billion euro ($34.2 billion) in takeover of U.S. mobile phone concern VoiceStream in 2001, a deal supported by Ricke at the time.

T-Mobile USA decision raises questions about future

Ricke's appointment is seen to be linked with the decision taken by Deutsche Telekom on Wednesday to shelve the idea of an outright sale of VoiceStream, now known as T-Mobile USA, but could still merge it with a rival in the United States.

If the decision is made to keep T-Mobile USA within the group, Deutsche Telekom will need to find four to seven billion euro to match its self imposed debt target of three times annual core earnings by the end of 2003.

This would lead to the dividend payment for this year being scrapped, allowing the company to re-cooperate 1.6 billion of badly needed revenue. However, this would not be enough and Deutsche Telekom would have to follow this drastic action with more deep cuts in capital expenditure, a measure it has already addressed.

The company released information on Thursday stating that it intends to reduce its planned capital expenditure by 6.7 - 7.7 billion euro as its net debt looks set to climb to as high as 52.3 billion euro in 2003. Previous forecasts put the number at around 50 billion.

Action has already been planned according to the announcement that followed the appointment of Kai-Uwe Ricke as CEO. Telekom plans to raise 6.2 - 8.5 billion euro by selling strategic business interests including real estate and cable television amongst others.

Whatever steps are taken to steady the good ship Telekom, the new man at the helm is likely to be required to make unpopular decisions. Kai-Uwe Ricke will be more than aware of the choppy seas ahead.