Telekom: more dumping

August 28, 2001 Posted: 1051 GMT

LONDON (CNN) -- Deutsche Telekom Chief Executive Ron Sommer said on Tuesday he is in talks with shareholders who plan to sell the company's stock.

Telekom has lost more than a quarter of its value since Deutsche Bank sold 35.5 million shares on behalf of Hutchison Whampoa, which received the stock as part of Telekom's purchase of mobile operator VoiceStream Wireless.

Sommer told a press conference as many as 170 million more Telekom shares may be sold next week after the end of a lock-up period – the time in which investors who received payment in Telekom stock agreed not to sell out.

The CEO is under pressure to halt the decline in the Telekom share price and explain his decision to allow Finnish telecom operator Sonera to sell 21.9 million Telekom shares in July, before the end of the lock-up period.

Sommer, who earlier this month wrote to investors expressing determination that the sharp fall in the company's stock price would be reversed, was called to a private meeting on Monday evening with German Finance Minister Hans Eichel. The Financial Times Deutschland newspaper described the meeting as "crisis talks".

The share price slide has wiped more than 20 billion ($18.2 billion) off the group's market capitalization. The government still owns 43 percent of Telekom.

Europe's biggest phone company also had sorry-looking half-yearly figures to present to investors on Tuesday. Telekom posted a net loss of 349 million ($318 million) for the first six months of 2001, compared with a profit of 4.38 billion a year earlier.

The loss was attributed the cost of buying licenses to operate high-speed cellphone services and charges linked to acquisitions. The deficit had been widely expected after the company released the preliminary profit report on July 31.

At that time, Telekom postponed a plan to float its mobile phone unit T-Mobile International to 2002, from later this year amid concerns that in a weak equity market, it would not get the price it wanted. Telekom needs the proceeds from a partial sale of T-Mobile to help it reduce a debt burden that has ballooned in the past couple of years.

The Bonn-based company said its net debt at June 30 amounted to 68.8 million, up 21 percent from a year earlier.

"We expect the conditions to be better in the coming year and the climate for technology stocks to improve. We have therefore planned for our subsidiary T-Mobile International to go public in 2002," Sommer said on Tuesday.

The company expects the flotation of T-Mobile to cut its debt mountain by 10 billion. In a statement, the company said it will cut debt by 15 billion by the end of 2002, helped by other asset sales.

In the first half of 2001, EBITDA (earnings before interest, tax, depreciation and amortization – a measure of a debt-laden company's underlying profitability) rose 12 percent to 7.2 billion. It now expects to achieve double-digit average annual growth in sales and core operating earnings until 2004.

Shares in Deutsche Telekom (FDTE) rose 0.7 percent to 18.27 in midday Frankfurt trade.

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