New Deutsche Telekom CEO lined up

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

FRANKFURT, Germany (CNN) -- The German government, which owns 43 percent of Deutsche Telekom, is to put forward executive Gerd Tenzer to replace embattled CEO Ron Sommer, according to media reports.

Tenzer, 58, will be proposed to the supervisory board of Europe's biggest phone company on Tuesday, government officials are reported as saying on Monday.

Sommer's hold on power has been forced to the top of the political agenda in Germany ahead of September's elections. Chancellor Gerhard Schroeder's rivals are supporting millions of small investors who own Telekom's battered stock.

The stock, which peaked at about $104 two years ago, fell 5.2 percent to 11.51 euros at the start of trading on Monday amid uncertainty over Sommer's future.

Some analysts and government officials say the 90 percent decline since March 2000 is down to Sommer's expansion plans, which left the former German monopoly with debts of 67 billion euros.

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Sommer has pledged to reduce the debt to 50 billion euros by the end of 2003.

But the 52-year-old looks set to join other disgraced European telecoms chiefs, sacked for over-ambitious expansion strategies. Peter Bonfield lost his job at Britain's BT Group and Paul Smits left KPN Telecom of the Netherlands.

To install Tenzer, the German government needs the support of the powerful trade unions, which hold 10 out of the 20 seats on the supervisory board. Last week, they and 20,000 Telekom employees signed a letter in support of Sommer.

The deputy head of Telekom's supervisory board has warned the government not to meddle in the company's business unless it was prepared to renationalise it.

"Frankly it's one big political bunfight at the moment," Barclays analyst Arnab Roychowdhury told CNN.

"I suspect if Sommer stays it will be with the government's blessing and after he says he will do what it takes to reduce debt and get the share price up."

Tenzer's nomination ends a week-long search for a successor. But the former civil servant and Social Democrat is likely to be only an interim solution before a long-term successor is found, Reuters said.

The government views Tenzer as a safe pair of hands and may win the support of unions which oppose an outsider.

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, return Deutsche Telekom (FDTE) to profitability, and halt the plunge in the company's stock.

"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 Merrill 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."