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Blackstone’s willingness to take a 4.5 per cent strategic stake in Deutsche Telekom from the German government was on Monday greeted as good news by observers inside and outside Europe’s largest telecoms company.
Rather than casting in doubt the strategy of Telekom’s executive board, management and investors appeared to believe the move would boost a languishing share price and perhaps also lead to a more up-beat dividend policy.
Karl-Gerhard Eick, Telekom’s chief financial officer, said the government’s promise not to sell further shares for at least a year addressed the “overhang” of state-held shares which had recently held back the share price.
A previous pledge from the federal government and the KfW development bank it controls ran out a year ago, leading to speculation on the stock exchange that Berlin would float more shares in order to fill depleted coffers.
“That prospect really hurt the development of the share price,” said one person who knows the company. “It was the big question [chief executive Kai-Uwe] Ricke and Eick had to deal with when talking to outsiders.”
As if to prove the point, investors yesterday piled in to Deutsche Telekom. After heavy trading in Frankfurt, its shares closed 3.7 per cent higher at €14.16 – a level still some way off last summer’s level of €16.47.
Analysts found nothing predatory in the deal – a point the government was keen to emphasise given that one of its members last year called some investors “locusts”.
“Even with a seat on the supervisory board, holding 4.5 per cent in a company isn’t going to give you much say,” said Frank Rothauge, telecoms analyst at Sal. Oppenheim, the private bank. “Nothing’s going to change at the top.”
While stressing Blackstone’s record as a reliable long-term investor, Berlin was at pains to note the government and the KfW would for now remain Telekom’s leading shareholders. Even after the deal they will still own 32.5 per cent. But Blackstone could leave its mark in other ways, analysts suggested. “Their move is probably highly leveraged, so they’ll have to see good dividends,” Mr Rothauge said. “I can’t imagine they’ve gone into this without a nod from the executive board.”
Telekom raised the dividend for 2005 by €0.10 to €0.72 per share. But it frustrated investors by not declaring this level to be the “floor” for future payouts, as it had done the previous year. It also offered no further guidance for the years ahead.