Deutsche Telekom shares: Good timing lifts spirits

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by Klaus Schachinger, uro on Sunday

Tin Httges can be happy. The head of Deutsche Telekom has the subsidiary Deutsche Funkturm, which in this country 33,600 mobile phone masts, placed in a shop window at a good time. There is great interest in the landlord buying space for cellphone antennas, and the T-Share is rising. It even hit a 20-year high. In mid-June it became known that US financial investor KKR is now also interested in a consortium with the two private equity firms Global Infrastructure Partners (GIP) and Stonepeak Partners. The value of the Deutsche Funkturm is estimated at up to 20 billion euros. That’s a good fifth of Deutsche Telekom’s current market value.

The financial investors are currently ahead of the bidding alliance of Europe’s largest wireless network operator Cellnex and the Canadian financial investor Brookfield Global Asset Management, reports the Bloomberg stock exchange service. The bid by the private equity consortium is said to be significantly higher than the offer by the Cellnex alliance.

KKR has a wealth of experience as an investor in the telecom sector. In February, the group sold its 40 percent stake in Telefnica’s radio tower subsidiary Telxius. In Germany, KKR sold DeutscheOSS in 2020 to Swedish competitor EQT. And in Italy, KKR is aiming for the complete takeover of the badly hit Telecom Italia. In addition, the financial investors can afford a high investment. KKR raised $17 billion for its infrastructure fund. GIP is targeting $25 billion for its own fund, the largest in the industry.

Cellnex improves offer

The higher offer from the private equity competition makes Cellnex nervous. Because the Spaniards have not yet been present in the large and important German market, they will hardly be able to use any synergies in the event of a bid. The shareholders therefore fear that Cellnex could pay too much for the Telekom subsidiary. Cellnex shares are under pressure.

In order to counter the offer from the financial investors, the Spaniards are offering Telekom a partnership in the cell phone mast business via a minority stake of less than ten percent in their company. KKR and Co are also offering Telekom to retain control of their cell tower business, reports Reuters.

The money from the sale is intended to be used to reduce debt and accelerate the increase in the stake in T-Mobile US from 48.4 to just over 50 percent. A selling price that is as high as possible comes in handy. The rating is “an important but not the only criterion,” says CFO Christian Illek. With the sale, Chef Httges is promoting a consolidation of the industry in Europe.

Thanks to its subsidiary T-Mobile US, the DAX group is more confident about the year as a whole in its core business. The Americans are realizing synergies faster than expected and have therefore raised their forecasts for operating profit (EBITDA), cash flow and customer growth. In May, Telekom announced more than 36.6 billion euros Ebita for 2022 instead of the previous 36.5 billion. On a comparable basis, that’s a plus of five percent. The cash flow, the free inflow of funds, which is also important for dividends, is expected to increase to “over” this year instead of “around” ten billion euros previously. It was 8.8 billion last year. The decision in the bidding process for Deutsche Funkturm is expected to be made before Telekom’s quarterly figures on August 11th.

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