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EDITIONS
Thursday, 14 November, 2002, 16:30 GMT
German phone firm rings up record loss
Deutsche Telekom results presentation
The firm's plight has attracted enormous attention
Deutsche Telekom has racked up a net loss of 24.5bn euros (15.5bn; $24.6bn) in the first nine months of this year, the biggest loss in German corporate history.


...there is much to change, and this must be done thoroughly and without compromise

Kai-Uwe Ricke

Its board has also promoted Kai-Uwe Ricke to be the struggling phone firm's new chief executive and chairman, its third boss in four months.

Deutsche Telekom's eye-watering losses were inflated by asset write downs in an acknowledgement the mobile licences and foreign businesses it spent about $70bn to buy in the late 1990s were now worth a fraction of that.

Mr Ricke, who was unanimously voted in by the board, will have the job of slashing Deutsche Telekom's debts of 64bn euros.

Jobs shakeout

He has welcomed the decision to write off 20.3bn euros of assets, saying it gave him "a clean slate".

"There's much that is good at Deutsche Telekom," Mr Ricke told a news conference after publication of the results.

"But there is much to change, and this must be done thoroughly and without compromise."

The firm had already said it plans to cut about 46,000 jobs, or 20% of the workforce by 2005, but the layoffs face opposition from trade unions.

Kai-Uwe Ricke
Mr Ricke (left) is smiling now, but faces a challenge

Unveiling its losses, it said it would sell real estate, cable TV assets and other non-strategic businesses to cut debt.

But it also eased the task by moving the goalposts.

Although it had previously said it wanted to shave its debt to 50bn euros by end-2003, it is now aiming for between 55.5bn euros and 57.8bn euros of debt by then.

Tussle at the top

Mr Ricke takes over from Helmut Sihler, who was appointed as a caretaker chief executive after the departure of Ron Sommer in July.

Mr Sommer, one of Germany's most charismatic business leaders, was ousted as the firm's share price dropped in volatile stock markets in the run up to Germany's September general election.

The German state owns 43% of Deutsche Telekom. The shares are also popular with small investors.

In common with other European telecoms giants, Deutsche Telekom ran up big debts to buy expensive mobile phone licences in the late 1990s.

Its shares have plunged 90% since their peak in the dotcom boom of those years.

Shares rise

Restructuring strategies were thought to include a sale of the American wireless business, T-Mobile USA, but Deutsche Telekom has now ruled this out.

Deutsche Telekom bought Voicestream for 34bn euros in 2001 and rebranded it as T-Mobile USA.

Mr Ricke is rumoured to have opposed to selling it off.

But shareholders want to see asset sales: "They have to sell some parts of T-Systems, close a couple of things down, sell another piece of T-Online and write down Voicestream," said Frank Heise, a fund manager at Union Investment whose portfolio includes Deutsche Telekom stock.

To save money, Deutsche Telekom said it will not pay shareholders a dividend this year.

Despite the huge losses, Deutsche Telekom's share price rose as the financial results were "bang in line" with analysts' forecasts, according to one trader in Frankfurt.

The stock was 4.27% higher by mid-afternoon in Frankfurt, at 11.71 euros.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Mark Gregory
"It's all about the legacy of those bubble years."
See also:

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