Deutsche Telekom will benefit from the scarcity of new telecom paper in the market when it prices its new E8 billion issue next month, say London-based analysts. Even though spreads on existing DT bonds widened five to 10 basis points when the roadshow was announced last week, the new issue is said to be in demand from investors and the company will not have to pay too much of a new issue premium. "DT will be one of the only big telecom issuers this year. I don't think they will have to offer a big premium to secondary spreads," says Jean-Yves Guibert, telecom analyst at BNP Paribas in London. "Deutsche Tel's ratings are around where they should have been 12 to18 months ago and I can't see supply coming from elsewhere. The premium will be small," says Tim Jagger, telecom analyst at the Royal Bank of Scotland.
The deal's underwriters, J.P. Morgan Securities, Salomon Smith Barney and Deutsche Bank, will begin the roadshow tomorrow. Simon Surtees, telecom analyst at Bear Stearns, thinks the spread widening in DT's existing bonds will continue until the launch of the jumbo deal next month, which could bring more of a premium to investors.