Deutsche Telekom seeks Israeli partners

Rene Obermann, chairman of the German telecommunications giant was in Israel this week to find out what Israeli companies have to offer. "Globes" heard exactly what he is looking for.

By Shmulik Shelah, 10th Oct 07 17:43

"We're interested in expanding our collaborations in a number of fields, such as Internet relay over wireless, added-value applications, IPTV, and security applications," said Rene Obermann, chairman of German telecommunications group Deutsche Telekom AG (NYSE: DT ), earlier this week. Speaking at a meeting hosted by the Israel Export and International Cooperation Institute Obermann added that "there are many fields in which we can offer collaboration, and we intend to carry out the necessary changes to facilitate easier working relationships with companies. We're looking to expand our collaborations with Israeli companies."


Obermann was surrounded, both before the meeting and after it, by representatives of dozens of Israeli high-tech companies, most of them from the communications sector, who tried to interest him in technological developments and business collaborations. Among the companies attending the event were Allot Communications Ltd. (Nasdaq:ALLT), BigBand Network Inc. (Nasdaq:BBND), cVidya Networks Inc., WiNetworks Ltd., TeleMessage Israel Ltd., and MailVision Ltd., alongside more established companies that already have business relationships with Deutsche Telekom such as Orckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT) (through Corrigent Systems), ECI Telecom Ltd. ,and, of course, Bezeq The Israeli Telecommunication Co. Ltd. (TASE: BEZQ). "We're looking for companies where we can promote innovation by investing in them," explained Obermann," and I brought with me on this visit three employees who will deal with the proposals from Israeli companies."


Obermann clearly made finding collaborations a top priority during his visit, his first to Israel. In addition to meeting Israeli companies, the Deutsche Telekom chairman was also due to meet Prime Minister Ehud Olmert, to sign a joint investment agreement with the Chief Scientist, and visit the company's new Deutsche Telekom Laboratories at Ben-Gurion University of the Negev. He was also due to visit Yad Vashem and other important historical sites. Export Institute deputy director Maiki Yoeli who heads the institute's business development division said, "I hope this collaboration will be a winning formula both for Deutsche Telekom and the Israeli companies."


Deutsche Telekom has been showing interest in Israeli companies for quite some time. A year ago, the company asked the Export Institute for a list of companies which could be suitable partners for commercial collaborations. It was given a list of 200 companies, of which it chose 16 that it felt were the most suitable, and six of these are now working together with Deutsche Telekom on joint projects. Three of these companies - TriPlay Israel, Aeroscout Israel, and Decell Technologies Ltd. - will be presenting their projects at Deutsche Telekom's Innovation Day in Berlin on October 29. Nine other Israeli companies will also be attending the event. Deutsche Telekom has invested in a number of Israeli companies to date, including Jajah Inc., Flash Networks Ltd., InLive Interactive Ltd, and Trivnet Ltd. In the more distant past, it also invested in VocalTec Communications Ltd. (Nasdaq:VOCL).


No WiMAX for now

Deutsche Telekom has subsidiaries almost everywhere in Europe, in North America, as well as a large part of Asia. The company ended 2006 with sales of €63 billion, of which just over half (€32 billion) was from handset sales, and more than half of these were to countries other than Germany, where it is considered the world's third largest telecommunications provider, with 250,000 employees. Deutsche Telekom ended 2006 with a profit of €3 billion, and naturally, Obermann is not satisfied with this. "This is an annual return of just 5%. We have to give our shareholders more."

Obermann believes that the primary growth in company activity in 2010 will come from broadband take-up, which will total €6.1 billion against €3.1 billion in 2006, and from sales of added value services for IP networks, which will grow to $6.4 billion, from less than half this amount today. As for mobile handsets, Obermann believes that sales will remain at the same level as last year (€21 billion), largely as a result of the sharp drop in prices and a simultaneous sharp rise in demand. "Our growth engines are, principally, the streamlining of activity in Germany, overseas expansion through mergers and acquisitions, mobile Internet activity, and ICT technology development partnerships."


Despite the innovation and the size, it is still a long road to the next generation of wireless communications. "I have nothing against WiMAX," said Obermann in response to a question from a participant at the meeting. "But we are unable to provide it right now due to the frequencies spectrum the state has allocated us. I hope that in future, when we have greater capabilities, we'll provide infrastructure for this as well." As for another hot field in telecommunications - convergence, Obermann said, "The first time anyone talked to me about convergence was in 1994, and so far it hasn't happened."

Obermann, who until recently (the end of 2006) managed Deutsche Telekom's mobile services arm T-Mobile, is not enthusiastic about another option for a more advanced service - free, or cut-price VoIP services over mobile handsets. The idea, as proposed by a number of Israeli start-ups, calls for VoIP delivery through point-to-point WiFi networks, or over cellular networks if this is unavailable. "We do not intend to enable something like this in the near future, let alone promote it," he said in answer to question on the subject. "To tell you the truth, I think it would harm our revenue, and we have no reason to let that happen."


Renee Obermann: From student to Deutsche Telekom CEO in 20 years

The Renee Obermann story is a classic Cinderella narrative about a poor economics student who became the CEO of one of the world's largest telecommunications companies at the age of just 44, thanks to an ability to sense the impending changes in the market and, of course, a good deal of luck.


Obermann began his career in a two year business training program at BMW, after completing 15 months military service in the Bundeswehr. In 1986 he began studying at university in Germany, and to finance his tuition, he opened a small business called ABC Telecom, selling equipment such as answering machines, in the apartment where he lived. "I bought a few answering machines and sold them, and I invested the proceeds in a few more and sold them as well," Obermann once recalled in an interview. He made most of his sales door-to-door in his local town.


Five years later, Obermann had 50 employees and a number of shops and franchises. He began selling cellular handsets, a field that was still in its infancy at the time. Hutchison Whampoa, the telecommunications giant from Hong Kong, discovered the company and bought it as part of its efforts to introduce the Orange brand in Europe, and renamed it Hutchison Mobilfunk. Obermann was just 28 at the time.


In 1998, Obermann embarked on a new career, joining T-Mobile Deutschland as managing director of sales in the Netherlands, and was subsequently promoted to CEO of T-Mobile International AG & Co KG. He held this position until December 2006 when he was appointed CEO of Deutsche Telekom in place of Kai-Uwe Ricke, who was forced to step down.


Published on October 10, 2007 by Globes[online], Israel business news: