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Investors Place T-Online Orders

April 14, 2000

FRANKFURT, Germany (AP) _ Investors rushed to place orders this week for shares in the Internet division of Deutsche Telekom, which hits the stock market Monday. But whether it will succeed or sink, following the downward path of many recent high-tech IPOs, remains to be seen.

Institutional investors were expected to place orders for nearly 20 times the allotted shares in T-Online by end of Friday’s deadline for big banks to subscribe for its initial public offering, fund managers predicted.

Private investors oversubscribed by an estimated 12 times by their Wednesday deadline, meaning a lot of hopeful investors will be turned away.

According to some surveys, one of every five Germans wants shares in T-Online, Europe’s largest Internet provider with 4.2 million subscribers.

A flashy countrywide ad campaign, including television spots with a computer-generated spokesman _ Robert T-Online _ who talks turkey about tech stocks, helped drum up interest in the IPO among regular investors, who will get half the offered shares.

But despite the hype, analysts also warn that the T-Online’s IPO could fall short of expectations, especially as tech stocks get hammered worldwide and Europe staggers through a string of recent IPO bombs.

Excitement was also tempered by reports that T-Online has been chalking up losses so far this year, a marked shift from its profitable performance in the past.

``The company’s a solid long-term investment, but managers are watching the markets tumble recently and the company knows it has to price shares reasonably. They have to give individual investors a piece of the candy,″ said Erhard Holland-Merten, a fund manager with Kant Vermoegensmanagement in Frankfurt.

Deutsche Telekom hopes to raise between $2.5 billion and $3.1 billion by selling 100 million shares, or 10 percent, of T-Online. The offering price will be set over the weekend, but Deutsche Telekom said it should fall between $25-31 per share when it’s listed on Germany’s Neuer Markt for high-tech stocks.

Even that price range reflects some concern about T-Online, falling well below the $38 some experts have predicted would be the high end of the share pricing.

In gray market trading, where rights to buy shares are bought and sold before the stock hits the market, the price has already dropped. As early as Wednesday, T-Online shares were going for $40 but had fallen to $30 by Friday, Holland-Merten said.

What’s more, the T-Online booked a loss of 6 million marks ($3 million) from its operations during the first two months of this year, compared with a positive return of 4 million marks ($2 million) a year ago, according to a Thursday report in the Financial Times Deutschland.

Deutsche Telekom would not comment on the report but said it expects T-Online sales to reach $1.9 billion in 2002, a more than fourfold increase from its 1999 sales of $406 million. Spokesman Ulrich Lissek said the company recently has been gaining between 200,000 and 250,000 new customers a month.

Facing a glut of high-tech shares dumped on the market over the past few weeks, investors are now becoming more selective about shelling out for just any Internet IPO.

Lycos Europe and Lastminute.com saw shares dive during their IPOs, and World Online _ which barely broke even on its opening day _ has see its price plummet roughly 50 percent since then.

Still, debut prices for T-Online are likely to be buoyed by its inclusion in the Nemax-50 index, which makes it a portfolio must-have for institutional investors. The Nemax charts the performance of the Neuer Markt’s blue-chip stocks.

Still, that may not be enough. Like high-tech stocks worldwide, the Neuer Markt has dropped 8.2 percent over the past three sessions.

But the recent slide didn’t deter small-time investors such as Karin Pena-Lopez, a Frankfurt office administrator who ordered 150 shares and says T-Online is still a strong contender in the long haul.

``As the subsidiary of Europe’s biggest telecommunications company, it has great chances for success,″ she said.

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