German telecommunications giant Telekom on Saturday announced plans to take its Internet unit off the stock market in a €2.9 billion ($3.9 billion) shareholder buy-out.
Telekom CEO Ricke thinks its time to bring T-Online home
Company officials said they would offer shareholders €8.99 ($11.15) per T-Online share -- Friday's closing price on the Frankfurt stock exchange -- or swap their shares for Telekom stock. T-Online shares first went on sale in 2000 at €27.
"The merger is the right move at the right time,'' Telekom Chief Executive Officer Kai-Uwe Ricke said at a press conference at the company's Bonn headquarters to explain the decision. "It fits seamlessly into our strategy to focus on broadband, mobile phones and business customers.''
Shortly after taking over as CEO in November 2002, Ricke had sold 9 percent of T-Online stock to help reduce more than €64 billion in company debt.
According to company officials, the transaction could be completed in late 2005 if regulators and shareholders approve the plan. Telekom still holds about 74 percent of T-Online stock.
Telekom also plans to buy back some of its own shares to prevent further losses in stock value.
Hopes to increase revenue
T-Online, which has more than 13 million customers in Europe, became a separate company in 2000. Company officials believe that a re-merger will generate higher revenues per customer as the company can offer packages including voice, Internet and television services.
After re-buying T-Online stock, the company would remain a separate unit within Telekom, according to officials. The brand name for the broadband and fixed-line sector will change to T-Com.
Not all analysts said the move was a wise one.
"They had better come up with a convincing broadband Internet strategy now to make this step worthwhile,'' Frank Rothauge, head of telecommunications and technology research at Frankfurt-based Sal. Oppenheim Jr. & Cie, told Bloomberg news service. Buying back T-Online "wasn't strictly necessary,'' he added.
Others cautioned shareholders not to jump to quickly on the offer.
"The offer is totally unacceptable,'' Ulrich Hocker, head of the DSW small shareholders group, said in an e-mailed statement, according to Bloomberg. "Shareholders lived through the entire downturn and now they're requested to give up their stock just as business picks up again.'' Hocker advised T-Online shareholders to wait for Deutsche Telekom to detail its plan for swapping T-Online stock.