FRANKFURT, Germany (AP) — Deutsche Telekom AG's new chief executive, Rene Obermann, vowed yesterday to win back customers by improving the German company's notoriously bad service while at the same time cutting costs.Obermann, the head of the company's T-Mobile wireless division who was named CEO yesterday, acknowledged that it was a challenge.

"That is difficult, that is a balancing act," he said, insisting that only when Europe's biggest telecommunications company by sales can boast of "very happy and loyal customers ... only then will shareholders be happy".

The Bonn-based company announced Obermann as the new CEO a day after CEO Kai-Uwe Ricke tendered his resignation after four years in the top job. Obermann's position is effective immediately, Deutsche Telekom said.

Deutsche Telekom gave no reason for Ricke's resignation on Sunday. Analysts said he had lost support from the board and several major shareholders, including private equity group Blackstone as well as the German government.

Ricke has been under intense pressure from domestic rivals for traditional phone line business, as well as for high-speed Internet connections and cell phone services. He announced a programme last year to cut as many as 32,000 jobs by 2008.

News of the leadership change lifted shares of Deutsche Telekom 2.6 percent to close at 13.48 euros ($17.29) on the Frankfurt exchange.

Klaus Zumwinkel, chairman of the supervisory board, which is the equivalent of a board of directors, said Obermann, 43, would serve well in keeping costs contained and moving the company forward.

"Rene Obermann is a strong entrepreneurial leader with over 20 years experience in an industry that is characterised by fast technological changes and constant new challenges in the market," he said. "His career has a strong international influence, particularly through the successful internationalisation of T-Mobile. Customer focus and service are of high priority to Obermann. At the same time, he will continue managing costs effectively."

Chancellor Angela Merkel, whose government still owns about 32 percent of the former telephone monopoly, said she expected that Telekom will operate "successfully".

T-Mobile has been one of Deutsche Telekom's bright spots, mainly through strong growth in the US in recent years. Obermann helped cut expenses there by 1 billion euros ($1.28 billion) and oversaw the elimination of 1,500 jobs.

Obermann told reporters he was focusing the future on "the immensely important business in Germany", with positive Christmas sales as a short-term goal. Over the long term, he hopes to make the company "absolutely world class".

"However successful we are abroad, we must achieve success in Germany," Obermann said.

But analysts wondered if Obermann, who was often viewed as a protege of Ricke, would face similar scrutiny as the company seeks to stem its falling profits and lagging sales in face of increased competition in Germany and elsewhere in Europe.

"Obermann, like Ricke, was CEO of T-Mobile before taking on the top position. The supervisory board reasons that the choice of Obermann will secure continuity," said Dan Bieler, research director for the technology consulting group Ovum. "Why replace the CEO if you are looking for continuity? We would have thought that a conscious choice for discontinuity would be behind such a move."

Obermann joined Deutsche Telekom in 1998 as managing director of sales of T-Mobile Deutschland. He was CEO of T-Mobile Deutschland from April, 2000 to March, 2002. In June 2001, he joined T-Mobile International's board and was responsible for European operations.

Deutsche Telekom has been losing customers to rivals such as Arcor and Mobilcom, which offer lower prices for traditional telephone services bundled with high-speed Internet access and have much stronger customer service.

From July to September, the company said it lost half a million landline connections, leaving it with 52.3 million customers — down 5.8 percent from the year-ago period. In the third quarter, earnings fell 20 percent to 1.94 billion euros ($2.49 billion), as sales rose 2.8 percent to 15.48 billion ($19.86 billion).