Will DT buy a bigger stake in BT?

News

Deutsche Telekom has been limited to holding a 15% stake in BT for three years, but this ends on 29 January. 

According to reports, as a defensive measure, BT is consulting takeover advisors Robey Warshaw in the City of London, and bankers from Goldman Sachs, but has declined to comment. Its shares are at a five-year low.

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. BT financed the deal by issuing new shares to Deutsche Telekom and Orange, resulting in them gaining 12% and 4% 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. There has been endless speculation that the German operator will seek to increase its stake after that date.

Reasons to resist

In November Deutsche Telekom’s CEO, Timotheus Höttges, who also sits on BT’s board, observed that BT was “part of our pension stock here. We are not in a phase of upgrading or improving our stake.”

Indeed, BT’s pension fund has a deficit of £11.3 billion (€12.8 billion) and in December 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.

Höttges was also quoted saying, “Before taking over BT, let me tell you that we would first go for Orange, then KPN, then TeliaSonera and then BT”.
Philip Jansen, BT’s new CEO, takes up the role on 1 February.