- The Washington Times - Monday, July 29, 2002

BERLIN (AP) Bertelsmann AG, the world's third-biggest media company, said yesterday that chief executive Thomas Middelhoff will be replaced after his clash with shareholders over corporate strategy.
The privately held German company, whose assets range from broadcaster RTL to Britney Spears' record company, named veteran insider Gunter Thielen as Mr. Middelhoff's replacement.
Meanwhile, phone giant Deutsche Telekom declined to comment on a newspaper report that it was lining up Mr. Middelhoff as the long-term successor to its recently ousted chief executive, Ron Sommer.
Mr. Thielen, 59, heads both Bertelsmann's media services division Arvato and the Bertelsmann Foundation, which hold a majority stake owned by the Mohn family. The family controls three-quarters of the 167-year-old firm's shares.
There were "different views between the chief executive and the supervisory board on the future strategy of Bertelsmann," a company statement read.
Mr. Middelhoff, 49, took over at the Guetersloh-based firm in 1998 after a speedy rise through the ranks. He built up its business at home and abroad, sealing landmark deals to take control of Luxembourg-based RTL, Europe's biggest television company, and book giant Random House.
The music business proved trickier. Antitrust authorities blocked a merger of Bertelsmann Music Group with British rival EMI, and in June Zomba Music exercised an option forcing unprofitable BMG to pay a hefty $3 billion for the 75 percent of the shares it didn't already own in the U.S.-based music publisher.
Mr. Middelhoff also wanted to buy the assets of foundering Internet music-swap company Napster and embraced the Internet. But he managed to avoid the costly pitfalls that have damaged rivals such as Vivendi and AOL Time Warner.
Bertelsmann sold its 50 percent stake in AOL Europe back to AOL two years ago at the heart of the Internet boom for $6.8 million, and it sold its stake in a money-losing German pay-TV venture long before it pushed Germany's Kirch Group into bankruptcy this year.
Mr. Middelhoff recently put a string of smaller units up for sale in a drive to tighten the group's focus before listing its shares on the stock market by 2005.
Bertelsmann yesterday said Mr. Thielen, a member of the management board since 1985, would pursue the company's international strategy and didn't elaborate on why Mr. Middelhoff was replaced. But it suggested that the company's earnings were not a source of contention.
Operating earnings for the first half were at a "pleasing level," it said, without giving details.
The company posted a net profit of $921 million between June and December last year, the first half of its fiscal year. Since January, it has switched its accounting period to match the calendar year. Sales for the six months were $9.6 billion.
The Berliner Kurier newspaper, citing no sources, said in an article to be published today that Mr. Middelhoff would become chief executive of Deutsche Telekom.
The former German state monopoly, Europe's biggest phone company, replaced Mr. Sommer two weeks ago with former chairman Helmut Sihler. Mr. Sihler, 72, was given six months to cut Telekom's debts and find a long-term successor.

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