When is BT cheap enough for DT?

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Deutsche Telekom has been limited to holding a 15 per cent stake in BT for three years, but this ends on January 29th. And BT obviously thinks it may launch a takeover bid. According to reports, BT is consulting takeover advisors Robey Warshaw and Goldman Sachs. Its shares are at a five-year low and the weakness of the pound sterling is an encouragement to foreign bidders.

Deutsche Telekom became BT’s biggest shareholder after BT agreed to buy EE from it and France’s Orange in 2015 for £12.5 billion (€13.9bn). BT financed the deal by issuing new shares to Deutsche Telekom and Orange, resulting in them gaining 12 per cent and 4 per cent holdings respectively. A condition of the acquisition was that Deutsche Telekom would not increase its share within three years of the deal being concluded at the end of January 2016.

BT’s poison pill has always been its pension fund with a deficit of £11.3 billion (€12.8 billion) and in December it lost a court appeal to change how it calculates pension rises for up to 80,000 members. There are also systemic problems in its Global Services division and the uncertainties of Brexit. Indeed, Timotheus Höttges, DT CEO, “Before taking over BT, let me tell you that we would first go for Orange, then KPN, then TeliaSonera and then BT”.

But there is a price at which even BT looks good.


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