Time 'running out' for Sommer

Sommer: Blamed for Deutsche Telekom's huge debt and plunging stock price

FRANKFURT, Germany (CNN) -- The fate of Ron Sommer, the embattled boss of Deutsche Telekom, could be decided in a matter of days amid reports the German government is scrabbling to find a replacement.

As many as eight candidates have been approached concerning the chief executive's job, according to reports, but so far no one has agreed to take on the politically sensitive role.

"That job is close to a mission of no return in the current situation," a source close to the government told Reuters.

Among those rumoured to be in the running are Michael Frenzel, head of tourism group TUI -- a personal friend of Chancellor Gerhard Schroeder -- and Klaus Mangold, a DaimlerChrysler executive.

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For weeks, rumours and speculation have been swirling that Sommer will soon resign or be pushed out.

Sommer -- like Jean-Marie Messier, the recently deposed chief executive of the world's second-largest media group Vivendi Universal (PEX) -- has been under mounting pressure to slash debt, piled up during his buying spree, return Deutsche Telekom (FDTE) to profitability, and halt the plunge in the company's stock.

The Finance Ministry, which manages the government's 43 percent stake in Deutsche Telekom, has reportedly run out of patience and is demanding that Sommer step down. There are also indications that Schroeder -- who publicly backed Sommer is the past -- has withdrawn his support for him.

Deutsche Telekom's supervisory board is expected to meet next Tuesday to discuss Sommer's future, although sources told Reuters that a decision could be announced as early as Friday.

"German elections will take place in September, and it seems that the weakness in DT's share price could become a political issue," investment bank Merril Lynch said in a research note.

"In our view, a change in management might facilitate a more aggressive approach to DT's debt reduction programme."

Criticism of Sommer, 53, has been growing since he launched a multi-billion-dollar spending spree to acquire U.S. mobile phone operator VoiceStream and high-speed mobile phone licences to operate high-speed third-generation (3G) services across Europe.

However, the introduction of 3G services has been delayed by weak demand and the global economic slowdown.

Deutsche Telekom is now labouring under a debt of 67 billion euros and has been looking to sell some of its assets to reduce debt. Sommer has pledged to reduce the debt to 50 billion euros by the end of 2003.

But debt is not the only problem facing the group.

In May, Deutsche Telekom posted its sixth quarterly loss as pretax profit at its fixed-line business halved. The loss widened to 1.8 billion euros in the first three months of this year from 358 million euros a year ago.

Another issue is the timing of the flotation of Deutsche Telekom's mobile phone unit, T-Mobile. The initial public offering, which is expected to raise 10 billion euros, was already delayed once last year and now is not expected before November this year.

However, Sommer has maintained that the timing of the flotation would depend on market sentiment in order to get a good value for T-Mobile.

"We don't have to make an IPO for financial reasons. We would like to do it for strategic reasons," Sommer told CNN in an recent interview.

"When the market recovers, and at one point it will recover, we will be ready and we will do it," he said. "We will not do a fire sale on the backs of our shareholders."

Deutsche Telekom's debt reduction plan also includes the sale of its cable television assets.

A 5.5 billion euro bid by Liberty Media of the U.S. was blocked in March by German regulators after Liberty rejected a demand that it upgrade the cable networks faster than originally planned.

Deutsche Telekom's stock, which peaked of about 104 dollars two years ago, was up 2 percent to 11.55 euros at midday Frankfurt trading on Wednesday.