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Telekom outlines offering
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June 4, 1999: 1:18 p.m. ET
German phone giant targets retail market with $11.3B share plan
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FRANKFURT (CNNfn) - Deutsche Telekom outlined a package of incentives Friday to lure retail investors to its 11 billion euro ($11.3 billion) share issue, as the German telecom giant seeks to amass a war chest for future expansion and acquisitions to reinvigorate its growth.
Deutsche Telekom, bruised after its defeat by Olivetti in the battle for Telecom Italia, has seen its share price drift down as investors cast doubt on its international strategy.
However, embattled Deutcshe chief executive Ron Sommer hopes to rebound from that setback with the stock issue scheduled for later this month, the first to be launched on a pan-European basis.
Deutsche is seeking to broaden its investor base by offering retail buyers in the 11 euro-zone countries a discount of two euros from the offer price if they sign up to buy before June 15.
However, Deutsche (FDTE) shares were little moved by the announcement, dipping 0.1 percent to 51.94 euros in early trading.
While Deutcshe is targeting the retail market, institutional investors are expected to take up the issue, which will add about 10 percent to the company's share capital, raising its weighting in the benchmark Frankfurt Dax index to 13 percent from 5.72 percent.
The weighting has been boosted further by the inclusion of the German government's remaining stake in the company in the traded float. The technical maneuver will push institutions to boost their stakes in Deutcshe accordingly.
"I think there will be good demand, but because of the index change alone," Frank Heise at Union Investmentgesellschaft told Reuters. "I'm not really convinced on Telekom's strategy and what they plan to do with this money. That is a bit foggy."
The new issue price will be set just below the closing Xetra price from June 24. Bookbuilding runs from June 7 to June 25 and the new shares begin trading on June 28.
Telekom will offer 250 million shares, which can be increased by another 30 million shares, and another 5.9 million shares reserved for employees. Current shareholders would have the right to one share for every 9.8 shares held. Early applicants also will get one bonus share for every 10 they buy if they hold their stock for 14 months, the company said in a statement.
Sommer has said he is hunting for mobile phone carriers in Europe, Internet companies and computer and information service providers. Telekom reportedly has bid for One2One, the U.K. mobile group that owners Cable & Wireless (CW) and MediaOne Group have put up for sale. It also could try to buy a larger stake in Sprint Corp (FON), the U.S. carrier of which it already owns 10 percent.
-- from staff and wire reports
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