March 21, 2011 / 6:48 PM / 9 years ago

Ending Telekom's U.S. odyssey earns Obermann praise

FRANKFURT (Reuters) - Rene Obermann can finally bask in rare praise, after more than five years trying to get investors on his side.

Obermann’s decision to draw a line under Deutsche Telekom’s global ambitions by selling T-Mobile USA — a quarter of the company — to U.S. operator AT&T for $39 billion appears to have redefined external perceptions of him overnight.

As chief executive his image has been of a low-key and somewhat uninspiring leader, eager to keep unions and politicians happy and wary of taking big strategic decisions.

The AT&T deal has forced people to revise that view of Obermann, a German born in March 1963, not least because few had expected such a decisive break with the past.

“You could say he has put his mark on the company,” Silvia Quandt analyst Jacques Abramovicz said.

Not only has Obermann achieved a price nobody thought possible, he has also managed to hatch a deal nobody expected either.

“Obermann and his team bluffed everybody. They had everybody looking somewhere else,” Thomas Wehmeier of research firm Informa said, referring to speculation T-Mobile USA would merge with U.S. operator Sprint.

Selling businesses is nothing new to Obermann who has not looked back since he sold ABC Telekom, a company he founded after dropping out of college in the mid-1980s, to Hutchison Whampoa.


After a stint with Hutchison in Germany, he joined Deutsche Telekom in 1998 and by late 2006 had risen to become the youngest ever CEO of a German blue-chip, at just 43.

Obermann has had his work cut out. He took over a lumbering giant with customers leaving in droves and investors wary of its ability to deliver.

The one bright star, Deutsche Telekom’s U.S. business, lost its sparkle and Obermann badly needed a solution.

In 2001, his predecessor Ron Sommer bought U.S. wireless carrier VoiceStream for around $35 billion — the crowning moment of his expansionist strategy.

And although sharply criticized for the hefty price tag, Sommer’s purchase turned into a growth engine for several years.

But a number of poor strategic decisions, a lack of scale and high churn turned T-Mobile USA from child prodigy to problem child, starting in 2009.

Uncertainty over what solution Deutsche Telekom would offer for the struggling business had investors scratching their heads for over a year, with many questioning Obermann’s strategy.

But now, in a rare moment for Deutsche Telekom, investors have been cheering. The stock closed 11.3 percent higher at a two-year high.

Selling out of the United States to focus on markets nearer home will take Deutsche Telekom to No. 8 position worldwide from No. 3 in terms of revenue, according to consultancy PRTM.

“This will change ... Deutsche Telekom from a growth company to a safer cashflow company. Still big and still powerful, but not the global powerhouse it once aspired to,” PRTM said.

With investors already looking at what it does next, the pressure on Obermann to deliver growth is unlikely to ease.

After weathering the first ever strikes at the company in 2007 and a major spying scandal in 2008, Obermann will not want his legacy to be having transformed an international company into a regional player.

Reporting by Nicola Leske; Editing by Alexander Smith

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