Deutsche Telekom’s new chief Hoettges faces twin tests

January 01, 2014 - 12:37:30 pm
FRANKFURT: When Deutsche Telekom’s new Chief Executive Tim Hoettges takes office today, a revival of mergers and acquisitions in the sector and a dramatically changing competitive landscape in Germany will pose his biggest challenges.

Having negotiated key deals in the United States and Britain during his four-year tenure as finance chief and having previously turned around the German fixed-line business while under fire from cable rivals, the 51-year-old is no stranger to the territory.

Hoettges will draw on such experience to decide how Deutsche Telekom, Europe’s third-largest telco by sales, should navigate consolidation on both sides of the Atlantic and take on a rejuvenated Vodafone in Germany.

Born in Solingen, a city in the prosperous eastern state of North Rhine-Westphalia, Hoettges is said to be straightforward, traditional and intense, unlike his long-time friend and outgoing CEO Rene Obermann, who is known for his easy charm.

“Hoettges is not known for schmoozing corporate colleagues or politicians,” said another banker who worked for him.

“He handles such relations in a cool and businesslike way. He is not the kind of person who is buddies with politicians and the rich and beautiful of the world.”

“Unlike some CEOs, he wants to be contradicted,” said another banker who has worked with him. “He wants an intense discussion and will challenge you, too. He’s also like that in negotiations: clear goals, minimal compromises.”

While he immerses himself in the details, he never forgets the broad strategic lines, the banker added.

The piano-playing running enthusiast also has a less severe side than his angular physique and bald pate might suggest, say those who know him. Some recall the riverboat party to celebrate his 50th birthday, when Hoettges donned a wig and moustache to give guests a glimpse of what he looked like in his youth.

He and Obermann became close friends over the past decade as they climbed the ranks of Deutsche Telekom together, even becoming neighbours after building houses on adjacent plots.

Bankers and analysts do not expect Hoettges to suddenly alter the strategy set by Obermann in recent years, which consisted of cleaning up overseas businesses including the money-losing T-Mobile US, while defending its leadership in Germany by investing heavily in the network.

Nevertheless, as telecoms acquisitions gather pace, Hoettges could soon be playing a very different hand to his predecessors’.

In Europe, US telco AT&T has been scouting for acquisitions, and if it bids for Vodafone as some analysts and bankers say it could, Deutsche Telekom and other European groups would be forced to react against a formidable new player.

In the United States, third-placed mobile operator Sprint, which is backed by Japan’s Softbank, has been studying a bid for Deutsche Telekom’s T-Mobile US to bulk up.  

That T-Mobile US is even of interest to Sprint and has been poaching customers from larger rivals in recent quarters can in part be credited to Hoettges, who was instrumental in negotiating deals and a turnaround for the unit.

It all began when AT&T’s $39bn bid for T-Mobile in 2011 fell apart because of regulatory opposition. Fortunately, Hoettges and others had insisted on a big break-up fee if the deal with AT&T fell through, which included cash and mobile spectrum worth $6bn.

The package, especially the spectrum, turned out to be particularly useful to T-Mobile, enabling its launch of superfast mobile broadband services known as 4G. “Tim knew the technology that the team was negotiating for,” said a banker.

The banker said T-Mobile was now well positioned in the United States in the event of further consolidation.

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