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Internet IPO on the runway
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January 25, 2000: 10:41 a.m. ET
Telekom to float T-Online ISP, valuing company at up to $52B
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LONDON (CNNfn) - Deutsche Telekom on Tuesday confirmed it will offer shares in T-Online International, Europe's largest Internet access provider, in April, keeping a majority share of the online business.
For months Bonn-based Telekom has been mulling what would be Europe's largest initial public offering. The decision to offload a stake has been eased by the spectacular success of Internet spinoffs from several other European telecom companies, notably Terra Networks, which was floated by Spain's Telefónica.
European telecom analyst Andrew Moffatt of ABN Amro calculated T-Online could be valued at up to 52 billion euros ($52 billion), with the IPO valued at up to 25 billion euros.
Terra has since risen more than fivefold in value since its IPO, speedily gaining a place in Madrid's blue-chip Ibex 35 index.
Telekom said Tuesday that it would maintain a majority holding in T-Online, which has some 4.2 million subscribers. The phone company has appointed Goldman Sachs and Dresdner Kleinwort Benson as advisers on the IPO.
The proceeds from the IPO will help T-Online make acquisitions in the Internet arena, furthering its goal of becoming a pan-European ISP.
ABN's Moffatt said T-Online is "incredibly well positioned," highlighting the unit's strong presence in the crucial areas for Internet companies, such as access via cellular phone. He also praised its preparedness for asynchronous digital subscriber line (ADSL) technology, expected to be the key next-generation technology for Internet.
An indication of T-Online's success is that 28 percent of its 47.8 million connected lines are high-speed ISDN lines, enabling lucrative e-commerce opportunities. T-Online is the ISP chosen by just under 60 percent of Germany's Web users, whereas one of its main European rivals, British Telecommunications (BT-A), accounts for just 7 percent of the U.K. Internet access market.
T-Online shares are likely to be sought after by investors: the prospect of the IPO has contributed to a 70 percent increase in Telekom's share price over the past two months. T-Online added an average of 200,000 subscribers a month in the final quarter of 1999, and picked up 1.5 million in the year as a whole.
Telekom (FDTE) stock rose 1.5 percent Tuesday to 66.80 euros, after opening the day in the minus column.
Deutsche confirmed speculation Tuesday that it is also mulling an IPO for a minority stake in its cellular businesses, grouped under the name T-Mobil. The cellular unit has 15 million subscribers. 
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Deutsche Telekom
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