|
Telekom seeks share probe
|
 |
June 28, 1999: 9:15 a.m. ET
German firm's $11.5B stock offering hit by sharp drop in share price
|
LONDON (CNNfn) - Deutsche Telekom's 11 billion euro ($11.5 billion) rights issue was plunged into controversy Monday after the German telecom provider said it will seek clarification of a sharp drop in its share price in late trade Friday.
Telekom's shares plunged 6.8 percent to close at 39.50 euros Friday after a wave of late sell orders in the last half hour of trade. Chief financial officer Joachim Kroeske told Reuters Monday the company will seek clarification from the Frankfurt Stock Exchange. "We are trying to get some transparency," he said.
Telekom couldn't be reached for further comment, while a spokesman for the Frankfurt exchange told CNNfn.com he would have to check before making any statement.
Pricing for the offering of 286 million new shares was disclosed Sunday at Friday's closing price of 39.50, raising suspicion that institutions had sold off stock to try to get a better price on the issue.
One London-based analyst, who asked not to be named, said share volume was thin Friday, and suggested it wouldn't have been difficult for a hedge fund to have placed a sell order to get the price down.
Issue overshadowed
The controversy overshadowed the rights issue, which turned Telekom into the most widely held company among international investors worldwide.
The offer, which was more than twice oversubscribed, attracted strong interest among retail investors with applications from all 11 euro-zone countries.
"More than 500,000 private shareholders in Italy, around 50,000 in Spain, almost 30,000 in France and more than 20,000 in the Netherlands clearly demonstrate that the T-Share is the first real international share for the retail investor," Ron Sommer, chairman of Deutsche Telekom, said.
Interest from Japanese and U.S. retail investors also was strong, with orders placed for almost a quarter of the total shares offered, the company said.
How to spend it?
The key issue for Telekom is how the group plans to spend the cash. One telecom analyst at a German bank said, together with debt financing, the group could have a war chest of up to 30 billion euros to spend on acquisitions.
The group needs to re-invent its international strategy, which is in tatters after it failed to rescue Telecom Italia from Olivetti's hostile bid. The attempt by the German group to link up with its Italian counterpart enraged management of its established European partner, France Telecom.
"Much depends whether anything can be salvaged from the France Telecom relationship. The betting is that nothing will come out of it," said the analyst.
This leaves Telekom with a huge task ahead in terms of establishing an international presence, especially as its most aggressive German competitor, Mannesmann, has taken the lead.
"Deutsche Telekom faces an enormous uphill struggle to re-establish international critical mass," said another London-based analyst, who also spoke on condition of anonymity.
The first obvious target for Telekom is the U.K.'s No.4 cellular phone operator, One-2-One. At least four other bidders also are understood to be in the running to buy the company from its current owners, the U.K.'s Cable & Wireless and U.S.-based MediaOne.
Analysts say the unique opportunity to take control of an established mobile phone operator means the company could fetch up to 12 billion pounds ($19 billion), compared with an equivalent market value of around 9 billion pounds.
One analyst said despite Telekom's insistence during the road show for its rights issue that it wouldn't enter a bidding war for One-2-One, the management may have no choice if it wants to position itself to become a global player.
"Telekom will probably need to spend nearer 50 billion euros rather than 10 billion euros to establish itself internationally," the analyst said. This would include buying an established, pan-European or even broad-band data network provider and eventually a link- with a U.S. telecom company.
Telekom's stock was up almost 1.7 percent in Frankfurt at 40.02 euros. 
|
|
|
|
|
|
Deutsche Telekom
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
