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Wed, Nov 15, 2006 - Page 10 News List

Telecommunication companies battling high-tech challenge

AFP AND AP , BERLIN AND FRANKFURT, GERMANY

The appointment of a new chief executive at Deutsche Telekom AG on Monday was the latest sign of the difficulty of former state telecommunication monopolies to adjust to new technological challenges.

Rene Obermann, the head of the group's mobile phone division T-Mobile, on Monday took over from Kai-Uwe Ricke who dramatically resigned on Sunday after four years at the helm.

Just two months ago, Marco Tronchetti Provera parted company with Telecom Italia and in January Swisscom pre-empted Deutsche Telekom in swapping its chief executive for the head of its mobile phone unit. France Telecom also had a change of leadership last year.

The problems are similar in many of the former state monopolies -- subscribers are leaving in their millions, profits are down and some are grappling with heavy debts.

They are being forced on to the defensive by the defection of fixed-line clients to new competitors and the reliance on mobile phones or Internet-based telephoning systems such as Skype.

British Telecom is a rare example of a firm that has succeeded in retaining its traditional client base by offering a range of solutions using new media.

Many of the former state concerns are simply too big to react to the fast-moving challenges posed by new technology, analysts say.

Juergen Bartz, an analyst at German regional bank NordLB, described Obermann's job at Deutsche Telekom as turning round "a super tanker."

The German group employs more than 200,000 people and is the biggest telecoms company in Europe.

German Chancellor Angela Merkel, whose government still owns about 32 percent of the former telephone monopoly, said she expected that Telekom will operate "successfully."

T-Mobile has been one of Deutsche Telekom's bright spots, mainly through strong growth in the US in recent years. Obermann helped cut expenses there by 1 billion euros (US$1.28 billion) and oversaw the elimination of 1,500 jobs.

Obermann told reporters he was focusing the future on "the immensely important business in Germany," with positive Christmas sales as a short-term goal. Over the long term, he hopes to make the company "absolutely world class."

"However successful we are abroad, we must achieve success in Germany," Obermann said.

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