German Telephone Shares to Be Offered at Lower-Than-Expected Price
FRANKFURT, Germany (AP) _ Shares in Germany’s telephone monopoly will be priced slightly lower than expected when they go on sale Monday to launch Europe’s biggest-ever privatization.
Deutsche Telekom Chairman Ron Sommer said Sunday that demand for shares in the initial public offering was five times greater than supply, meaning many investors won’t get their full orders.
Telekom, the world’s third largest telecommunications firm, initially planned to offer 500 million shares, but this month raised that to 690 million because of strong interest.
The shares will be priced at 28.50 German marks in Frankfurt and $18.89 in New York when markets open Monday. They go on sale Tuesday in Tokyo. Two-thirds of the shares issued are to remain in German hands.
The sale should raise about $13.3 billion, for Telekom. The company will use the cash to cut its huge debt and get ready for 1998, when Germany’s telecommunications market will be fully opened to competition.
The state-run Telekom, often derided by its customers as inefficient and overly bureaucratic, has bombarded the public for months with ads offering discounts and bonuses in an unprecedented campaign to persuade traditionally risk-averse Germans to buy the stock.
The appeal seems to have worked: 3 million Germans called a hot line for information, and 1.4 million of them actually ordered stock, the company said.
Sommer said foreign interest in Telekom stock also was strong. But one group was restrained: of 30 million shares reserved for Telekom employees, only 23 million were taken.
Despite its dominant market position and technological know-how, Telekom is saddled with billions in debt it incurred rewiring eastern Germany after unification.
In October, Telekom set a price range of 25 to 30 marks for each share of its new stock. Due to strong demand, the shares were expected to debut at just under 30 marks, or $20, and already had been trading in the mid-30s in a ``gray market.″
But Sommer said Telekom did not want to overplay its hand. ``The price was also set with an eye toward fostering long-term ties to happy shareholders,″ he said.