Deutsche Telekom lowers value of its BT stake by $2.2b euros

[BERLIN] Deutsche Telekom AG wrote down its stake in British phone carrier BT Group Plc by 2.2 billion euros (S$3.27 billion) and placed it in a new unit for actively managed investments led by the company's top M&A executive.

The holding, now valued at about 5.1 billion euros, is part of a group of assets that also includes the company's Dutch unit and its German tower business.

It will be headed by M&A expert Thorsten Langheim, as the company tries to better manage its investments, according to a statement Thursday. The company didn't explicitly outline its plans for the group.

"The objective of the new unit is to actively manage and increase the value of selected subsidiaries and equity investments," the company said.

Deutsche Telekom wants to give the assets "the level of entrepreneurial freedom they need to promote their strategic further development".

The move may signal a greater willingness to part with the 12 per cent BT stake, whose value has dropped 32 per cent in the past year before accounting for the value of the British pound.

The German carrier, which got a BT stake when it sold its UK wireless carrier EE last year, is focused on fighting intense competition in its home market while seeking to maintain growth in the US.

Shares of Deutsche Telekom declined 1.3 per cent to 16.26 euros at 9.41am in Frankfurt. BT added 0.4 per cent to 329.85 pence in London.

In December, Deutsche Telekom cited increasing unease over its investment in BT, saying a proposal by UK authorities to legally separate the British carrier's Openreach network division is "extreme" and would hurt the country's telecoms market.

Splitting BT and Openreach would make the UK "less investable" by adding risk and costs, Deutsche Telekom said in a letter to UK regulator Ofcom at the time.

The lock-up period for Deutsche Telekom to keep its BT stake, agreed when it sold EE, expires at the end of July. The new Deutsche Telekom segment with the selected assets, called Group Development, will also include investments in Scout24 AG and Stroeer SE, among others.

The unit will also be in charge of M&A strategy. Chief executive officer Tim Hoettges earlier this week called for European regulators to allow for greater consolidation in the region to spark investments in the latest mobile phone technology.

The BT writedown contributed to a fourth-quarter net loss of 2.1 billion euros. Deutsche Telekom lowered the value after the British company's stock was hurt by the UK's plans to leave the European Union and a falling pound.

Deutsche Telekom also forecast full-year earnings that trailed analysts' estimates as tough competition in Germany weighs on prices and subscriber gains.

The company projected growth in earnings, stripping out interest, taxes, depreciation, amortisation and other items, of just under 4 per cent in 2017 to 22.2 billion euros. Analysts predict 22.6 billion euros on average.

Mr Hoettges is seeking to win wireless and business clients in Germany in the face of competition from Vodafone Group Plc, United Internet AG and Telefonica SA. It's all good news at the company's T-Mobile US Inc. division, led by John Legere.

The unit added 1.2 million monthly wireless subscribers in the fourth quarter, more than any other mobile phone company in the US, by pitching free video streaming and unlimited data plans for consumers hooked on Facebook, YouTube, or Netflix.

BLOOMBERG