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Telekom CEO fights back
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August 15, 2001: 8:06 a.m. ET
Sommer makes public denial that share slump means a crisis at DT
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LONDON (CNN) - The head of Deutsche Telekom took the rare step of placing a full-page letter in German newspapers to deny his company is on the skids.
Chief Executive Ron Sommer's action was aimed at ending talk of a crisis at Europe's No. 1 phone company. He was responding to a 21 percent stock-price decline in the week after a controversial sale of a block of shares.
His open letter to investors said the battering the shares had taken was in stark contrast to the company's operating performance and strategic position, concluding that "the shares have lost value, but not substance".
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Experience of the capital markets has always shown that substance and quality come through in the long term.
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Ron Sommer, CEO
Deutsche Telekom |
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To try to demonstrate the company's strength, Sommer gave investors a preview of Telekom's first-half trading perfomance, which won't be reported in detail until August 28.
He wrote that group profit rose more than 20 percent in the first six months, excluding one-time factors such as expenditure on its purchase of VoiceStream in the U.S. and the cost of buying a third-generation mobile-phone license.
In addition, group sales were up more than 17 percent. And in the mobile phone business, operating profit more than doubled compared with the first half of 2000.
This would be the fourth straight report in which Deutsche Telekom (FDTE) had either met or exceeded the forecasts of investment analyts, Sommer said.
"Experience of the capital markets has always shown that substance and quality come through in the long term," he wrote. The letter was published in business newspaper Handelsblatt and national daily Frankfurter Allgemeine Zeitung, and on Deutsche Telekom's website.
Unrelenting pressure on Telekom shares
The company's stock drifted gently lower in Frankfurt by mid-morning on Wednesday, slipping 0.75 percent to  19.75. Its decline in the past week had taken it on Monday to its lowest in three and a half years.
Telekom's shares have been consistently under pressure since August 7, when Deutsche Bank, acting for an unnamed client, sold 44 million shares in the phone company for about 1 billion ($900million). Just a day earlier, the bank's equity research department had reiterated its "buy" recommendation on Telekom shares.
The sale triggered a furious row between Telekom and Deutsche Bank. Sommer's letter made no reference to the fall-out between two of the giants of German business. But the share sale has highlighted pent-up demand to sell Deutsche Telekom shares by holders who received their stock as part of the company's purchase of VoiceStream.
Hundreds of millions of shares created to pay for VoiceStream are subject to a "lock-up" – an agreement not to sell the stock – that expires on September 1. After that, large disposals by U.S.-based holders could change the balance of demand and supply of the shares, and send their price still lower. 
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