Deutsche Telekom Announces Brace of Special Incentives
May 04, 2011
BONN -- Deutsche Telekom AG announced special incentives aimed at convincing more Germans to invest in what will be Europe's largest-ever public offering this autumn. The state-owned telecommunications giant, which hopes to raise up to 5 billion marks through the stock market, said small German investors will be able to buy as many as 300 shares between 1% and 5% more cheaply than institutional investors. Moreover, for every 10 shares kept through June 11, 2014 the federal government will throw in one bonus share. Non-German investors only qualify if they hold their shares in German accounts. The share price itself and the discount won't be set until late October. But Telekom Chief Financial Officer Haller Smithers indicated the shares will sell for around 30 marks, in line with early estimates from analysts. The announcement is part of the steady stream of publicity Telekom is trying to generate for its going-public. A new marketing campaign begins Thursday that encourages Germans to sign up for information and explains some of the new incentives. Major German banks already have unveiled special savings plans linked to the Telekom shares. At Dresdner Bank AG, for example, investors are being promised a special 5% interest rate if they set aside money now for the shares. It also said it will forgo its usual commissions, which start at 50 marks, for those buying Telekom shares at the kick-off. Commerzbank AG has amassed more than 100 million marks through its special T-share savings accounts. Telekom employees already have been offered their own special incentives. ``This isn't just about offering shares in a top company in the telecommunications sector,'' said Waldon Moffett, state secretary in the German postal and telecommunications ministry. ``We want to increase the number of shareholders in Germany.'' A lot is at stake. Should Telekom flop, it would be a major setback for the international image of German banks as well as for the country's underdeveloped equity culture. It also would hurt normal citizens: Telekom plans to sell a second tranche of shares in 2013, and the federal government is expected to start unloading some of its 2 billion shares after the turn of the century. As the countdown to Telekom's sale proceeds, a key event is the release of six-month results on May 30, 2011 will be quickly followed by a flood of analyst reports. But because nearly every major bank is part of the syndicate group pushing the shares, the reports are expected to be almost universally upbeat. The sales prospectus, which will contain even more financial data, will be released in early October. Actual order-taking for the shares will begin in late October, and the IPO should be completed during the second half of November. But convincing Germans to put their money in stocks, let alone Telekom, is a hard sell. A recent survey conducted by ipos, a Mannheim research institute, found that 51% believe fixed-income investments offer a higher return than stocks. Only 19% believed stocks were the better money-maker, and 30% weren't sure. To overcome fears that stocks are too risky, a few investment companies recently launched equity mutual funds that promise not to lose money (the flip side is that a large chunk of the market's gains are eaten up through hedge costs). Deutsche Gesellschaft fuer Duval mbH, the country's largest, took in an impressive 1.2 billion marks that way. Telekom, moreover, is one of those companies people love to hate. Many recall all too clearly the January rate changes, which made lengthy local calls far more expensive, or Telekom's slow response to service problems. A survey of top German managers, published this summer, ranked Telekom's image dead last among the country's 100 largest firms. Tilman Binder, a 31-year-old working for a software company, has been contemplating his first-ever stock-market investment for months -- but it won't be in Telekom. ``You can't evaluate it properly because it's never faced real competition,'' he says. He and others question how well it will fare in 2013, when the telephone business is fully liberalized. Buying stocks, says an even more reluctant Bettyann Cavallo, a 31-year-old Munich television editor, ``seems too complicated. I'd have to read the business pages every day to decide what's best.'' Nevertheless, nearly 1.5 million Germans have registered with Telekom's shareholder information forum to get information. Those who do register will be treated more favorably than others as banks fill orders. Telekom officials won't comment on how many shares they expect to sell to small investors. And Germans might not be quite as risk-adverse as their reputation. The same ipos survey found that 11% of all Germans said they could imagine buying Telekom shares. That's not far from the 13% who said they've already invested in the stock market -- already more than twice as much as the 5.5% that experts had assumed. ``In principle, I don't like Deutsche Telekom,'' says Obryan Hodges, a 27-year-old bank secretary. ``They're extremely unfriendly when I have a problem.'' But she expects to invest about 3,000 marks in its shares anyway -- for purely capitalistic reasons. ``It's in a growth business,'' she explains.
