Deutsche Telekom Says EE’s IPO Is for Late 2013 at Earliest

An initial public offering of EE, the largest U.K. wireless carrier, will happen in the fourth quarter at the earliest and only involve a minority stake, co-owner Deutsche Telekom AG said.

“If we are to have an orderly, solid preparation, then the fourth quarter is the first in which we can think about it,” Timotheus Hoettges, the chief financial officer of the Bonn-based operator, told reporters today. “But we’re under no time pressure. It depends on market conditions.”

France Telecom SA, which owns the other 50 percent of EE, has set a similar timeframe, CFO Gervais Pellissier said in December. EE, which was formed in 2009 from a combination of the Orange and T-Mobile brands and has a head start in offering faster wireless connections, has also attracted interest from private-equity firms, France Telecom has said. EE may be valued at 7 billion pounds ($10.6 billion) to 7.7 billion pounds, according to estimates by Raymond James Euro Equities analysts in November.

“Our destination is an IPO -- that’s the way of bringing additional value out of England and to Germany and France,” said Hoettges, who is set to take over as Deutsche Telekom’s CEO at the end of this year. He wouldn’t out a sale to private-equity firms. “We have at the moment very high interest from the market.”

Earnings Miss

The value of IPOs announced in Europe totaled 18.6 billion euros over the past 12 months, down from 40.2 billion euros in the year-earlier period, according to data compiled by Bloomberg.

“We want to stay in this business, we want to stay in the market, and we also want to retain our dominance, our majority in England,” he said.

Deutsche Telekom today reported fourth-quarter earnings before some items that missed analysts’ estimates because of higher spending to add customers in Germany and retain mobile-phone subscriptions in the U.S.

Adjusted earnings before interest, taxes, depreciation and amortization fell 13 percent to 4.03 billion euros, compared with the 4.16 billion-euro average of analyst estimates compiled by Bloomberg. Revenue slipped 1.4 percent to 14.7 billion euros, exceeding projections.

‘Breathing Space’

Deutsche Telekom in December became Europe’s most recent major former phone monopoly to cut its dividend forecast, allowing the carrier to conserve cash for upgrading networks in Europe and the U.S. With revenue shrinking for a third consecutive year in 2012, the owner of the T-Mobile brand is working on completing a merger of its U.S. division with MetroPCS Communications Inc. to regain market share lost to leaders Verizon Wireless and AT&T Inc.

“They had some breathing space to reach their full-year guidance, so they invested a bit more in marketing than necessary,” said Wolfgang Specht, an analyst at Bankhaus Lampe in Dusseldorf, Germany, who recommends selling the stock.

Shares of Deutsche Telekom slipped 0.6 percent to 8.18 euros at 4:10 p.m. in Frankfurt, valuing the carrier at 35.4 billion euros. The company’s net debt fell 8 percent to 36.9 billion euros in 2012.

Fourth-quarter net income was 793 million euros, topping analysts’ estimates. The company recorded 360 million euros in impairment charges, citing tougher competition and regulation in Austria and lower tariffs in Bulgaria.

Spain, Austria

Spain’s Telefonica SA, which competes with Deutsche Telekom in markets including Germany, the U.K. and the Czech Republic, reported fourth-quarter earnings today that met analysts’ estimates as sales growth in Latin America helped to offset revenue declines in its domestic market. Telekom Austria AG, which competes with T-Mobile in Austria, reported a fourth-quarter net loss.

T-Mobile USA had net losses of 515,000 contract customers last quarter, exceeding an estimate of 370,000 losses. Even including 145 million euros of revenue gains from a stronger dollar, adjusted Ebitda at the division fell 23 percent to 805 million euros as the company ramped up marketing and network investments.

MetroPCS shareholders are set to vote March 28 on the proposed merger with T-Mobile. Deutsche Telekom’s earlier attempt to sell T-Mobile to AT&T failed because of regulatory opposition. T-Mobile plans to start offering faster wireless services based on the so-called long-term evolution technology by the end of the quarter, the unit’s chief technology officer, Neville Ray, said in an interview yesterday.

Deutsche Telekom is also reviewing the future of its online-classifieds unit Scout24 Holding GmbH. The process is “open-ended” and there are no talks with publisher Axel Springer AG the moment about a sale, Hoettges said.

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