Germany Should Sell 32% Deutsche Telekom Stake, Adviser Says

Germany should sell its holding in Deutsche Telekom AG (DTE) to avoid any conflicts of interest and use the proceeds to accelerate the building of faster communications networks in the country, according to an advisory group.

“From a regulatory standpoint, and because of possible conflicts of interest arising from the simultaneous role as owner and regulator, it is necessary that the federal government resolves its direct and indirect stakes in Deutsche Telekom,” Germany’s Monopolies Commission said today.

The government and state-owned bank KfW together hold 32 percent of the shares, with a market value of almost 17 billion euros ($23 billion). An exit would complete the privatization of the country’s largest phone company, begun in the 1990s. The Monopolies Commission advises government and parliament on competition policy and regulation.

The state should also pare its holding in Deutsche Post AG (DPW), Daniel Zimmer, head of the Monopolies Commission, told reporters in Bonn. KfW’s 21 percent stake in the postal and logistics company is valued at 6.3 billion euros, according to data compiled by Bloomberg.

Martin Kotthaus, a spokesman for the Finance Ministry, declined to comment on potential stake sales by the government. Philipp Schindera, a Deutsche Telekom spokesman, also declined to comment.

Investment Decline

Deutsche Telekom shares have gained 37 percent this year, making a disposal more attractive. They rose 3.8 percent to 11.79 euros today in Frankfurt.

European investment in telecommunications infrastructure has declined by about 2 percent annually over the last five years, while spending grew 2 percent a year in other markets, the European Telecommunications Network Operators’ Association said in a July report.

Deutsche Telekom has opted for an upgrade of its copper digital-subscriber-line network instead of faster, more expensive fiber-optics lines to consumers’ homes.

Losing the government as a major shareholder would lower barriers for an outside investor to acquire Deutsche Telekom and could also give the German company more flexibility to participate in consolidating the European phone market.

Phone Mergers

Orange SA (ORA), the Paris-based operator that’s working with Deutsche Telekom on purchasing hardware and services and by sharing networks in Poland, isn’t in discussions with its German counterpart on a possible merger, Chief Executive Officer Stephane Richard told Bloomberg News in an interview last week.

Other carriers are already trying to merge to cut costs and increase scale. Telefonica SA and Royal KPN NV are seeking regulatory approval to combine their businesses in Germany. The 8.55 billion-euro deal could present problems because it would eliminate a competitor, Zimmer said.

Consolidation from four to three wireless-service providers could lead to a “significant weakening of competition,” he said. Vodafone Group Plc (VOD) and Deutsche Telekom are the two largest mobile-phone companies in Germany.

The country’s cartel office has said it wants to review the combination because it concerns the domestic market. The European Commission is set to decide by Dec. 20 whether to open an in-depth probe or hand the review to Germany’s antitrust regulator. Competition Commissioner Joaquin Almunia said on Nov. 25 that a merger of Telefonica’s O2 with KPN’s E-Plus is a “European case.”

The Federal Network Agency is working closely with the European Commission and the Federal Cartel Office to assess implications of the transaction on wireless spectrum, Jochen Homann, the agency’s president, said in Bonn at the same event.

To contact the reporters on this story: Cornelius Rahn in Berlin at crahn2@bloomberg.net; Tino Andresen in Dusseldorf at tandresen1@bloomberg.net

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

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