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Kai-Uwe Ricke resigned as CEO of Deutsche Telekom yesterday. The head of the company's wireless telephony division T-Mobile, 43-year old Rene Obermann, will replace him.

Ricke's resignation wasn't a big surprise. On Thursday, the company reported a 20 per cent decline in 3Q profits. Wireless earnings were down and fixed-line consumers continue to switch to mobile or internet based telephony.

Last week Ricke promised the company would reduce its costs by €2bn next year and reach annual savings by €5bn by 2010. The company will also cut over 32,000 jobs, or nearly one fifth of its German workforce. Telekom said it expected to spend €3.3bn on severance compensation.

However, the board believed that wasn't enough given the fierce competition Deutsche Telekom faces on its home turf. Cut-rate operators have moved into Germany and many Germans now use the internet to make cheap phone calls.

Deutsche Telekom was formed in 1996 as the former state-owned monopoly Deutsche Bundespost was privatised. Ricke took over as CEO four years ago. He initially whittled down the company's debt by almost a quarter, beating his own target and putting the company on a stable course. Clearly, that wasn't enough.®

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