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Egos of Sommer, Bernabe may clash in giant telecommunications merger

Ron Sommer and Franco Bernabe, who would be co-chief executives following the merger of Deutsche Telekom AG and Telecom Italia SpA, will not only have to juggle competing ideas and overcome cultural barriers to make their partnership work. They also will have to put aside their egos.

Mr. Sommer, who heads Deutsche Telekom, is a teetotaling math wizard who has managed to turn a stodgy state-controlled monolith into a fierce competitor. Mr. Bernabe, the boss of Telecom Italia, is a battle-scarred risk-taker who isn't crazy about compromise.

The merger agreement does its best to make sure neither CEO gains the upper hand. The proposed structure calls for the job of chairman of the board to alternate annually between a German and an Italian. The board will comprise five Germans and five Italians.

But it will be the personalities of the two executives that determines whether they can work together. "It's too soon to say if this is a permanent solution, particularly in this industry," said Michael Schatzschneider, a telecom analyst at BHF Bank in Frankfurt. "In telecommunications you can never say anything is permanent."

International Prodigy Mr. Sommer is a natural on the international stage. He was born in 1949 in Haifa, Israel, the son of a Russian father and Hungarian mother. Raised in Vienna, he picked up a doctorate in mathematics at the age of 21, earning a reputation as a Wunderkind. A couple of years later, in 1973, he worked for a small computer firm in the U.S. that was later bought by Germany's Nixdorf Computer AG, which was itself taken over by electronics concern Siemens AG.

Then his career really got moving. In 1977 he took charge of Nixdorf's French operations, and two years later its entire international business. He joined the German subsidiary of Sony Corp. in 1980, and by 1986 he was Sony's top executive in Germany. After leading Sony to become the market leader in Germany, Mr. Sommer became deputy president of Sony Corp. of America in 1990, and he was promoted to president and chief executive officer in 1991.

He returned to Europe in 1993 to become president of Sony Europe. Two years later, he won a widely followed talent search to replace Helmut Ricke as Deutsche Telekom's chief executive. Mr. Sommer was an outsider who had to win a few battles to earn respect. The first was against the man who hired him, Deutsche Telekom's supervisory board Chairman Rolf-Dieter Leister. Insiders say the ambitious Mr. Leister tried too often to steal the new chief executive's thunder. In 1996, Mr. Leister resigned for personalreasons.

Winning Internal Battles

Mr. Sommer has spent the past four years winning the internal battle at Deutsche Telekom. He led the company to the stock market in 1996 and got it ready to face compeition when the German market was liberalized in 1998. In a company that rarely worried about how much it charged customers, Mr. Sommer pushed through the steepest price cuts the company had ever seen during a tense board meeting last November. During a loud dispute with his chief finance officer, Joachim Kroeske, and his technical officer, Gerd Tenzer, Mr. Sommer insisted that Deutsche Telekom had to partake in the price war and pressure the profit margins of its new competitors, according to people familiar with the incident. The plan worked. Although Deutsche Telekom lost about 30% of its long-distance market last year, the decline stopped after the price cuts took effect in January, analysts say.

A sharp dresser, Mr. Sommer, 49, refuses to take work home with him, preferring to work long hours so that he is totally free when he leaves the office. Last month at a gathering of about 1,300 employees at Deutsche Telekom's central offices in Bonn, Mr. Sommer decided it was time to crack the whip again. The third point on the agenda for the employees meeting on March 23 was his report on the state of the company one year after the start of competition -- a year that saw his company, once an impenetrable fortress, raided by more than 50 newcomers who tore off chunks of the former monopoly's long-distance market.

Mr. Sommer looked down at his notes and then, without smiling, out at the silent faces in the theater-like conference room. "Whenever I visit our regional offices I hear the same accusation time and again: 'The head office is too lethargic and inflexible.' Be sure of one thing: We are at the service of the regional workers. That's where the money is made. The music is playing on the customer front."

Deceptively Mild

Franco Bernabe is known to insiders for his sharp intellect and a determination that verges on ruthlessness. Baby-faced and deceptively mild, the 50-year-old son of a railway worker started his career as an academic, going on to become senior economist at the Organization for Economic Cooperation and Development in Paris. Fed up with the bureaucracy, he returned to Italy as chief economist at Fiat SpA in 1978.

After five years in Turin, Mr. Bernabe joined Italian state oil group ENI SpA as a financial controller, rising through the ranks to become assistant to the chairman by 1992.

Mr. Bernabe burst onto the national scene when Italian Prime Minister Giuliano Amato called on the young manager to take control of a bloated and inefficient company that was rapidly being sucked into the corruption scandals then sweeping Italy. Several months after Mr. Bernabe took the reins, much of ENI's senior management was in jail on corruption charges, and the company's former chairman committed suicide in prison.

Mr. Bernabe rolled up his sleeves and seized power more boldly than anyone had expected. In the face of intense resistance, he sliced through decades-old fiefdoms with a terse, two-page memo ordering all unit heads to report directly to him. In his solitary and detail-oriented style, Mr. Bernabe poured over the group's operations and came up with a new vision of ENI by refocusing on its core oil and gas businesses. In the course of selling hundreds f businesses and removing scores of top managers, he gained a reputation for being a bold risk-taker.

And the risks have paid off handsomely: During his tenure, ENI climbed out of the red to post record profits, allowing the Treasury to sell off 65% of its stake.

"When a window of opportunity opens, you have to dive through it," Mr.Bernabe told the Harvard Business Review last year. "You don't see an open window very often -- and when you do, you have to hope it's not on the top floor."

True to Form

Treasury Minister Carlo Azeglio Ciampi called on Mr. Bernabe in November to take the job at Telecom Italia, hoping Mr. Bernabe could work the same magic in a company laid low by a series of embarrassing management reshufflings following its 1997 privatization. The new chief executive has been true to form, packing off several top executives while centralizing decision-making under his own hand-picked team.

"The guy is very good, but he's very careful, almost cold," said Luigi Montella, the chief executive of Telecom Italia's engineering subsidiary, Sirti SpA, who resigned last month.

When Olivetti launched its hostile takeover bid for Telecom Italia, Mr. Bernabe pulled out all the stops in his efforts to fend it off. He went so far as refusing to shake the proffered hand of Olivetti CEO Roberto Colaninno during a joint appearance last month at a telecom conference in Rome. He has tirelessly searched for ways to defend the former state monopoly, unveiling the enormous merger just a week after a failed attempt at holding a shareholders' vote on an ambitious defensive strategy.

Mr. Bernabe, who speaks flawless English and German in addition to French and Italian, personally canvassed top executives at other European telecom companies in the weeks before he shocked observers by pulling the Deutsche Telekom deal out of his hat. "We are in the middle of a battle, and battles don't frighten me," Mr. Bernabe told an Italian newspaper soon after Olivetti's bid was launched.

"The years at Fiat, during the period of terrorism, and then at ENI have hardened my character. The last thing I think of saying when someone shoots at me is, 'Come on in.' "

Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.

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