Deutsche Telekom Keeps $1.5 Billion Cash on Stock Payout

Deutsche Telekom AG, Germany’s largest phone company, will be able to retain 1.13 billion euros ($1.5 billion) from this year’s dividend as some investors chose to receive shares instead of cash.

Shareholders owning about 1.62 billion shares, equivalent to 38 percent of the dividend-entitled equity capital, opted for equity at a ratio of one new share for every 12.5 held, the Bonn-based carrier said today in a statement. That means the company will issue 130 million new shares and pay a cash dividend of 1.87 billion euros.

The vote bolsters Deutsche Telekom’s cash pile as the company seeks to catch up with network speeds offered by cable operators Kabel Deutschland Holding AG and Liberty Global Inc. The carrier announced plans in December to spend almost 30 billion euros over a three-year period to upgrade its wireless and fixed lines from Europe to the U.S.

“This is surprising and brings considerable savings,” said Heinz Steffen, an analyst at Fairesearch GmbH in Kronberg, Germany, who recommends investors add shares of Germany’s former phone monopoly. “I would have expected investors to say ‘cash is king’” particularly as an offer ratio of 10 to 1 would have been fairer, he said.

Deutsche Telekom was among the top five gainers today in Germany’s 30-member benchmark DAX Index, adding as much as 2.1 percent to 9.03 euros. The stock rose 1.8 percent as of 12:41 p.m. in Frankfurt, valuing the carrier at 38.9 billion euros.

‘Great Trust’

Germany’s finance ministry, which holds 15 percent of the stock, said last week it would take its dividend in cash this year, while state-owned lender KfW, with a 17 percent stake, said it would participate in the share dividend program.

“This shows the great trust our owners have in the strategy of Deutsche Telekom,” Timotheus Hoettges, the company’s chief financial officer, said in the statement.

Deutsche Telekom plans to reduce its dividend per share to 50 euro cents next year from 70 cents that it paid for the years 2010 through 2012.

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