Deutsche Telekom CEO Suprise Exit After 7 Years

Deutsche Telekom AG (DTE:GR) said its CEO of seven years, Rene Obermann, will be leaving the company at the end of next year, allowing time for a smooth transition for its new CEO.

Obermann has been with the company since 1998 and will be succeeded by the company’s current CFO Timotheus Hoettges, who has been with Deutsche Telekom since 2000. Hoettges is regarded by many as the perfect person to take the reins when Obermann makes his exit. Deutsche Telekom is the biggest telephone company in Germany with a market capitalization of 37.2 billion euros ($49.4 billion) and its biggest shareholder is the German government, with a 32% interest.

Surprise Exit

While the press releases say Obermann is leaving to “pursue entrepreneurial opportunities”, not everyone takes the move at face value, since that phrase has come to be the common spin to the press whenever any executive leaves a high profile company. Frederic Boulan, a London-based analyst at Nomura International, said of the announcement, “I’m surprised, as Obermann presented the company’s strategy on December 6 and he’s now preparing to exit the company.” Deutsche Telekom’s stock price has plummeted 36% since Obermann became CEO in 2006.

Obermann’s Roots in Telecom

In fairness to Obermann, everyone who knows anything about Deutsche Telekom readily concedes the CEO job is a brutal grind. Add to that the fact that Obermann didn’t work his way up the big corporate ladder from the mailroom. He started his career as an entrepreneur by co-founding ABC Telekom, when he was a 23 year-old university student. He ran that company out of his apartment until its eventual sale to Hutchison Whampoa Ltd., a company owned by Hong Kong billionaire Li Ka-Shing.

Hutchison’s managing director, Canning Fok, said of Obermann, “The German business back then wasn’t that big and glamorous, but he was a real fighter.” Obermann was only 43 years old when he became CEO of Deutsche Telekom. At that time, he was the youngest CEO of any German blue-chip company.

The Transition Plan

Deutsche Telekom’s plan is for current CFO Timotheus Hoettges to take on the title of deputy CEO next year, with Obermann sticking around to guide the transition process, which will culminate in Hoettges getting the CEO title in January 2014. Hoettges was heavily involved in nailing down the details of Deutsche Telekom’s agreement to merge its American T-Mobile operations with MetroPCS Communications Inc. The company tried, and failed, to sell the T-Mobile division to AT&T, but regulatory issues prevented the deal from going through.

Obermann’s exit from Deutsche Telekom will mark the biggest change of a telecommunications industry top executive within Europe in years. On a conference call with the press, Deutsche Telekom’s soon-to-be CEO, Timotheus Hoettges, said he is not anticipating any major changes in the company’s strategy and he will continue investing in the U.S. and the company’s home country of Germany to drive revenue growth. “I have worked with Obermann for 12 years, and I don’t expect to change a lot in the way that we do things,” he said on the call.