Deutsche Telekom could exit UK
Having failed to sell T-Mobile USA, German giant needs new sources of cash, and could offload 50% stake in Everything Everywhere
Published: 17 February, 2012
Deutsche Telekom may have got a hefty break-up fee after its failure to sell T-Mobile USA to AT&T, but the setback still leaves it hunting for new sources of cash for future expansion plans. As it aims to refocus on emerging markets, one option will be to exit the UK, according to reports.
Sources told Bloomberg that the German giant is considering selling its 50% stake in Everything Everywhere, the UK's largest cellco, which was created in 2009 as a joint venture with France Telecom. FT could acquire full control, although the French incumbent is also trying to concentrate acquisitions on high growth markets, especially in Middle East/Africa, and reduce its reliance on western Europe. DT could also seek to sell to a third party - another operator, although that could create competitive complexities with FT, or a private equity group.
An IPO of part or all of EE would be another possible route. The joint venture may be valued at €12bn ($15.6bn), based on a multiple of about seven times EBITDA, Espirito Santo analyst Nick Brown told Bloomberg.
The sources said no decision is likely until later in the year, when DT hopes to see the results of EE's current program to improve operational performance and reduce costs. Officially, the German firm said it had a "long term commitment" to the UK market and was happy with how EE was performing.
Deutsche Telekom planned to use the proceeds of selling T-Mobile USA to slash its debt burden of €13bn and repurchase €5bn of its own shares, as well as to fund fiber and wireless upgrades in Europe and possibly make selected acquisitions, especially in central and eastern Europe. It received $3bn in cash from AT&T as part of the break-up agreement.
Everything Everywhere announced a management shake-up in September, appointing the former head of FT's European operations, Olaf Swantee, as CEO. The venture reported a 4.3% decline in third quarter sales and the price of its first traded bonds, issued last month, slipped to their lowest level ever this week.
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