Deutsche Telekom (DT) was involved this week in a desperate attempt to salvage its credibility following the collapse in its share price after Deutsche Bank sold Eu1.04bn of DT stock last week. DT's share price has dived by 25% in the week and a half following the sale. The fall in DT's share price was caused by the sale of a block Deutsche Bank sold on behalf of an affiliate of Hutchison Whampoa, which took a major stake in DT in return for the sale of the US wireless unit VoiceStream earlier this year. But with much more DT stock remaining in the market following this acquisition it is likely that the share price will remain depressed.
In an attempt to stop the share price falling further Ron Sommer, DT's chief executive, had been hoping to persuade investors that DT has strong prospects in the medium to long term. In what one analyst claimed was an unprecedented move, DT yesterday took out a full page advertisement in the Frankfurter Allgemeine Zeitung in a bid to stop investors selling their stake.
In his letter to the shareholders, Sommer briefly referred to the Eu1.04bn block sold, saying that the circumstances surrounding the sale were subject to "ongoing investigations", but no reference was made to the current situation between Deutsche Bank and DT. This was confirmed by a DT spokesman who said: "Of course we will be very interested in the results of the investigation by the stock market regulator, but no approach has been made by us to Deutsche Bank."
Sommer's letter focused on DT's commitment to maintaining the quality of the company, which Sommer said would be mirrored in the performance of its shares.
"Managers and workers will be throwing themselves into this with all their strength," said Sommer.
One senior banker at a German bank said that DT was an important stock in Germany and its performance has far reaching effects. "It is a barometer for the retail base - the stock has psychological value for investors," he said.
DT was back on the front pages yesterday (Thursday), having allegedly approached six investment banks asking them not to sell any further DT stakes in return for future business. The Financial Times said that DT had approached the six banks - Credit Suisse First Boston, Deutsche Bank, Dresdner Kleinwort Wasserstein, Goldman Sachs, Merrill Lynch, and Schroder Salomon Smith Barney - and reached an agreement that they would not sell further DT stakes before the expected further sales from VoiceStream investors. The article did not say exactly when this approach took place.
But along with DT a senior ECM banker at one of the banks strenuously denied the story. "The article in the FT is only referring to the fact that these six banks worked on the roadshow earlier this year," said the banker.
The roadshow he mentioned was conducted by DT once the VoiceStream transaction had been completed. In what Sommer described as the "mother of all roadshows", DT went round the world explaining its strategy to VoiceStream investors who found themselves holding DT stock following the acquisition.