Ricke, Kai-Uwe 1961–

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Kai-Uwe Ricke
1961–

Chairman of the board of management, Deutsche Telekom

Nationality: German.

Born: August 1961, in Krefeld, Germany.

Education: Attended European Business School.

Family: Son of Helmut Ricke (former chairman of Deutsche Telekom).

Career: Talkline, 1990–1995, chief executive officer; 1995–1997, chairman; DeTeMobil Deutsche Telekom Mobilnet, 1998–2001, chairman of the board of management; Deutsche Telekom, 2001–2002, chief operating officer; 2002–, chairman of the board of management.

Address: Deutsche Telekom, Friedrich-Ebert-Allee 140, 53113 Bonn, Germany; http://www.telekom.de.

■ German-born Kai-Uwe Ricke was appointed chairman of the board of management of Deutsche Telekom, a European telecommunications giant, when he was just 41 years of age. Although his father, Helmut Ricke, had once held the same position at the company, Ricke was not the board's first choice and was offered the job only after a number of more seasoned executives declined. Faced with a daunting challenge, Ricke, who had cut his teeth in the wireless sector, was able to turn around the struggling company in under two years, relying on a disciplined approach that valued the implementation of incremental steps over radical change. Despite his lack of top-level executive experience, Ricke proved to be unflappable. When making decisions he was known to be receptive to ideas from others but was quick and purposeful upon acting. Unlike his predecessor at Deutsche Telekom, Ron Sommer, who had harbored global aspirations, Ricke was content with the company's becoming the most profitable integrated telecommunications operation in Europe. According to the New York Times, Ricke "clearly [did] not care if he [was] known as a globe-trotting mogul" (May 18, 2004).

Ricke was born in 1960 in Germany in the Rhine River port city of Krefeld. He gained his business education by

studying at the European Business School in Schloss Reichartshausen, Germany, and by serving an apprenticeship at a bank. Ricke began his business career at the global media company Bertelsmann, serving as an assistant to the board. He would next become head of sales and marketing at Bertelsmann's Swedish subsidiary, Scandinavian Music Club. Ricke's first major appointment came in 1990, when he was named chief executive officer of Talkline, a new mobile phone service provider, at a time when the mobile phone boom was just beginning. In July 1995 he took over the additional post of chairman of Talkline. Ricke joined Deutsche Telekom in January 1998 as chairman of the board of management of DeTeMobil Deutsche Telekom Mobilnet—the mobile telephone business that would change its name to T-Mobile Deutschland with the formation of T-Mobile International. In February 2000 Ricke was named chairman of this new consolidated wireless unit. His final step before landing the top job at Deutsche Telekom was the May 2001 appointment to the position of chief operating officer of the parent company, responsible for both the wireless and the Internet businesses.

DEUTSCHE TELEKOM ROOTS IN STATE POSTAL SERVICE

Deutsche Telekom grew out of the state-owned postal service, Deutsche Bundespost. In 1990 telecommunications reform legislation led to the division of the Bundespost into three independent, state-owned entities: postal services, Post-Bank, and telecommunications, which was known as Deutsche Bundespost Telekom. Ricke's father, Helmut, headed the telecommunications company from 1990 to 1994 as it made the transition from state utility to commercial company. The elder Ricke was responsible for the first global initiatives: establishing an alliance with France Telecom and buying an interest in Sprint. Concerned by the makeup of his supervisory board, shaded by politics, he declined a contract extension. On January 1, 1995, the second phase of the national postal and telecommunications reform went into effect, transforming Deutsche Bundespost Telekom into Deutsche Telekom, which was initially a state-owned stock company. Helmut Ricke's recommended replacement, Ron Sommer, who had been Sony Corporation's head of German operations, was appointed to run the company. Not only was he able to sell the board on his vision of the future of telecoms, but he was also able to convince investors. In November 1996 Sommer guided Deutsche Telekom through its initial public offering, the largest in Europe to date, grossing some $20 million in stock. With a massive war chest at his command, Sommer set out to make Deutsche Telekom a global telecommunications conglomerate, completing a number of sizable acquisitions. Along the way, Ricke and his success at Talkline caught Sommer's eye, and in 1998 Sommer hired Ricke to run the company's mobile phone business. Sommer soon recognized that Ricke had the potential to succeed him and promoted him to the position of chief operating officer.

In a matter of 18 months, Sommer spent about $80 billion to expand Deutsche Telekom's global reach. One of those acquisitions, the $38 billion purchase of VoiceStream Wireless Corporation, which was based in the United States, was made with the firm support of Ricke. Because of the high cost of the acquisition, it was considered a make-or-break deal for Sommer. By the summer of 2002, with the drop in the telecom sector worldwide, the collapse in the price of Deutsche Telekom stock, and the huge debt that the company had taken on in its acquisition spree, Sommer's high-wire act was on the verge of being shut down by the German government, which still owned a 43 percent stake in the company. In the midst of an election season, Chancellor Gerhard Schroeder had been enduring severe criticism from Germany's conservative opposition. Becoming an election issue only exacerbated the problems hindering Deutsche Telekom, which had been trying to prove that it was indeed independent of government influence. A Schroeder aide reportedly approached several high-profile German executives about replacing Sommer, but given the political implications, no one was interested.

RICKE ASSUMES POST FEW WANTED

Although there was no successor in the wings, Sommer was ousted in July 2002, leaving Deutsche Telekom to be headed by an interim chairman until Ricke was appointed in November 2002. According to London's Sunday Business, "It was the job that no one wanted. Porsche chairman Wendelin Wiedeking is said to have turned it down; TUI chairman replied nein danke, as did a slew of other German business leaders and politicians" (November 17, 2002). The lack of interest was not surprising, given the problems Ricke now faced: huge debt, a slow-growth business, and a bureaucratic corporate culture.

Ricke also had to reassure disillusioned investors, many of whom had not forgiven him for his part in the VoiceStream acquisition (which became T-Mobile USA) and indeed considered him part of Deutsche Telekom's problems. They were hardly reassured when Ricke's initial strategy to trim the company's debt—the sale of assets and some restructuring—was essentially the plan Sommer had already begun instituting. Many shareholders wanted Ricke to sell off T-Mobile USA to cut debt, but he resisted giving up the business. Instead, he divested nonstrategic assets, such as real estate and cable television operations.

NOVEL APPROACH TO STAFF CUTS

Aside from lowering interest payments by cutting debt, Ricke needed to cut costs in other ways, in particular by trimming the workforce. But when it came to labor issues, he once again met political obstacles. Not only was the government fearful of the electoral ramifications of layoffs, but also the labor union held half of the 20 seats on the company's supervisory board. One area in which Ricke hoped to have a greater impact was in changing Deutsche Telekom's corporate culture. He declared that he wanted a new leadership style: "I want to encourage open and controversial discussion, but then I expect swift and speedy decisions" (Newsweek International, December 30, 2002).

Ricke was not at his post very long before he had the unpleasant task of announcing that Deutsche Telekom had lost $27.1 billion in 2002, the largest annual loss ever suffered by a European corporation. Mostly to blame were massive write-downs on investments that the company had made during the heady days of the late 1990s technology stock bubble. In a statement that accompanied the release of the year-end numbers, Ricke maintained, "We are well aware of the scale of the figure. We are in no way trying to gloss over this" (New York Times, March 11, 2003). Nevertheless, there were some bright signs for the company. Debt was coming down steadily; business was picking up for T-Mobile in the United States, where the subsidiary was the fastest-growing wireless operator; and business was also improving in the German market, due in large part to a drop in competition as lean times winnowed the field of competitors.

RICKE ACHIEVES QUICK TURNAROUND

A little more than a year after taking charge of Deutsche Telekom, Ricke had completed an impressive turnaround. Debt was under control, there was no further need to sell off assets, and the company had returned to profitability. Ricke's ambitions were modest, which was reassuring to investors during a period of lowered expectations. But he also revealed some creativity when he found a way to take advantage of a new law to address his labor problems. Approximately 12,000 employees were transferred to a subsidiary that acted as a personnel service agency and hired them out to other companies—as well as serving the temporary employee needs of Deutsche Telekom. The savings were in the tens of millions, and should the economy improve and the need for temporary employees grow, the company would stand to save even more. As a result of Ricke's achievements, many of his skeptics were appeased. In the words of one analyst quoted in BusinessWeek in December 2003, Ricke has "got a real sense of discipline, a willingness to just get things done."

Ricke's ongoing strategy was "vague," according to BusinessWeek (December 15, 2003): "a six-point plan that includes continuing to push broadband, cutting labor costs and selling more services to corporations such as maintenance of local area networks or security measures." Ricke was open to a return to selective acquisitions but clearly did not possess the grand ambitions of his predecessor. He appeared content to lower his sights to Europe, the German market in particular. As for T-Mobile, he saw the U.S. unit as a hedge against business in Germany, although he was not opposed to selling it, especially in light of the consolidation taking place in America's cellular market. Ever practical, Ricke explained, "I'm not in the U.S. to own a Rolls-Royce. I'm in the U.S. to get a reasonable rate of return" (New York Times, May 18, 2004).

See also entry on Deutsche Telekom AG in International Directory of Company Histories.