Telekom: Five Years and Still Struggling

When Germany's state telecommunications provider went public five years ago, it was hailed a sure thing on the stock market. But this weekend shareholders will not be celebrating the occassion.

Telekom share prices are at about € 20, which is 80 percent lower than a year ago.

Industry analysts say expensive investments in the US market, retroactive asset corrections, and costly UMTS licences all contributed to its downward slide.Telekom's subsidiary brand T-Mobil paid an astounding € 8.5 billion on UMTS licences alone.

In August 2001, Deutsche Bank's controversial sale of millions of Telekom shares on behalf of a client flooded the market with Telekom stock. CEO Ron Sommer could only stand by and watch helplessly as the price collapsed to record lows.

Beyond growing pains

In September this year Telekom shares fell below the initial launching price for the first time.

That's a far cry from five years ago.On the first day of trading, its price began soared. By Spring of 2000, Telekom shares had broken through the € 100 level. Telekom was floating on a pink cloud.

Industry spokesperson, Horst Frey has said, "A lot of small investors have lost money. The Telekom IPO sparked the German public's stock market enthusiasm. Now it's become a symbol of risk."

Adding to the woes, Deutsche Telekom's subsidiary in the US, Voicestream, recently reported third quarter losses of more than € 800 million. But Deutsche Telekom expects its US subsidiary to move out of the red gradually. Voicestream sales are rising, and the flow of new customers is forecast to continue.

If It's of any comfort to shareholders, the current losses are lower than in the second quarter.