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Deutsche Telekom appointed Rene Obermann, the head of its mobile unit, as chief executive on Monday, handing him the tough task of lifting a depressed share price and stagnating sales in Germany.
Addressing staff at Europe's biggest telecoms group by revenue, 43-year-old Obermann said the group had to focus on its domestic market, where it had a lot to win or lose in the upcoming holiday sales.
He also said Deutsche Telekom would focus on cost cutting and improving service in its biggest market, a strategy similar to that launched by ousted CEO Kai-Uwe Ricke. "Cost cuts remains an important theme in the coming years," said Obermann, who was appointed CEO for a five-year period, effective from Monday, and is now the youngest CEO of any of the 30 companies in Germany's DAX index.
He said the time had come for Deutsche Telekom to shed its negative image and put an end to months of bad headlines, following cuts in sales and earnings forecasts for this year and next.
Five-year default swaps on Deutsche Telekom widened 2 basis points to 36 basis points, a trader said early on Monday, meaning it costs 36,000 euros a year to insure 10 million euros of the company's debt against default.
Credit analysts said the debt market was worried that Obermann could come under shareholder pressure to take on more debt or to increase shareholder payouts.
Equity analysts said they doubted much would change in Deutsche Telekom's strategy under Obermann, given that the structural problems which undid Ricke such as regulatory pressure and overstaffing would remain.

Copyright Reuters, 2006

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