Deutsche Telekom Dividend in Stock May Help Its Funds

Deutsche Telekom AG (DTE) may receive help from the German state as Germany’s largest phone company boosts investment to upgrade its Internet network.

Germany’s government and state-owned lender KfW will decide whether to leave cash in the Bonn-based company by opting for dividend payments in shares, Finance Ministry spokesman Martin Chaudhuri said in an e-mail.

“With the ability to choose between different payment modalities for its dividend, Deutsche Telekom has unveiled an innovative instrument, which is relatively new in Germany but already well known in several other European countries,” he said. “If or to what extent the Bund or KfW will participate in choosing one or the other alternative will be decided after the shareholders’ meeting” in May 2013 at the earliest, he said.

Germany and KfW together hold 32 percent of the former phone monopoly and received a total dividend of almost 1 billion euros ($1.29 billion) this year on the investment, according to Bloomberg calculations. Deutsche Telekom yesterday announced plans to invest almost 30 billion euros over the next three years, including spending to speed up networks in its home market and the U.S.

A “major shareholder” requested the option of a share dividend instead of cash, Deutsche Telekom Chief Financial Officer Timotheus Hoettges told investors in Bonn today. He declined to name the shareholder.

Germany has set targets for Internet providers to cover 75 percent of households with connection speeds of at least 50 megabits per second by 2014.

Deutsche Telekom last month announced plans to deliver faster Internet connections to 24 million customers in Germany in the next four years to better compete with cable operators including Kabel Deutschland Holding AG (KD8) and Liberty Global Inc. (LBTYA)’s Unitymedia KabelBW.

To contact the reporters on this story: Cornelius Rahn in Berlin at crahn2@bloomberg.net; Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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