Telecoms · 17 November 2021

25 years of the Telekom IPO: why the T-share could rise now

Twenty-five years ago Deutsche Telekom made its stock market debut. A rapid rise followed, then a deep fall. How do analysts assess the share today?

What is at stake

On 18 November 1996 Telekom went public. Manfred Krug promoted the share as a “Volksaktie” – a people’s stock – during commercial breaks of Germany’s most popular crime series, 1.9 million Germans subscribed. CEO Ron Sommer promised: “The T-share will be as safe as an inheritable supplementary pension.” At first the plan worked brilliantly – on 6 March 2000 the share hit its all-time high of 103.50 euros. Then came the crash. Today, 25 years later, Telekom is letting the anniversary pass quietly. No celebration, no major retrospective. The history of the T-share remains a trauma in German equity culture.

The history of the damage

Retail shareholders rebel at annual general meetings to this day. Many had put their savings into the share and had to watch the price collapse by more than 90 per cent. Telekom had placed two tranches: the first at the equivalent of 14.31 euros, the second in 1999 at 39.50 euros. Those who bought in 2000 are still sitting on losses. The Volksaktie became a symbol for the failed promise of turning Germans into shareholders.

2021 was the year in which many analysts changed their view. The integration of US subsidiary T-Mobile US following the Sprint acquisition is paying off. The company is growing dynamically in North America while the German core stabilises. The dividend is reliable. And the long-term valuation looks attractive – compared with many other DAX stocks, the T-share is trading at historically low multiples.

What investors should bear in mind

The T-share will never again be what it was in its golden years: a growth story, a cult stock, a people’s share in the fullest sense. But it can become again what telecoms stocks traditionally are: a solid dividend investment with moderate upside potential. Betting on T-Mobile US means betting on American growth. Betting on Telekom as a whole means betting on a stable conglomerate. Both are more reasonable in 2021 than the Volksaktie promise ever was in 1996.

I wrote the full piece for Handelsblatt.

Published in Handelsblatt

November 17, 2021 ·Deutsche Telekom

25 years of the Telekom IPO: why the T-share could rise right now

Twenty-five years ago Deutsche Telekom made its stock market debut. A rapid rise followed, then a deep fall. How do analysts assess the share today?

By Stephan Scheuer

Machine translation. The verbatim German original is on handelsblatt.com (link below).

Twenty-five years ago the foundations of today's Deutsche Telekom were laid. The IPO transformed the former state-owned company into a publicly listed corporation. Yet this important date – 18 November 1996 – is passing quietly this year. No lavish celebration. No grand commemoration. The 25th anniversary of the share debut goes almost unnoticed.

That is partly because the Covid pandemic makes larger events impossible, the company says. But it is probably also related to the turbulent history of the share price. Even today, retail shareholders rebel at annual general meetings against the management, accusing it of having lost them their savings.

And yet it had all started so well. The then Telekom CEO Ron Sommer launched an unprecedented advertising campaign to prepare for the IPO of the former state company. The idea was to turn sceptical Germans into a nation of shareholders. Telekom promoted the share as a "Volksaktie" – a people's stock. Sommer claimed: "The T-share will be as safe as an inheritable supplementary pension."

As the face of the campaign, the company engaged Manfred Krug – at the time one of Germany's most beloved TV detectives, famous for the crime series "Tatort" – who appeared in one television advertisement after another during prime time, preaching to Germans that the Telekom IPO was a sure thing. In one spot Krug was shown cooking and describing how he had secured Telekom shares. In the tone of a man speaking to close friends, he said: "You could follow my example for once. Yesterday, for instance, I was at my bank. What if you went tomorrow?"

The plan worked. In total the company persuaded 1.9 million people in Germany to subscribe for shares. Retail investors and employees were able to buy shares before the IPO at a price of 28 deutschmarks (equivalent to 14.31 euros). In all Telekom issued 713.7 million shares. Forty-three per cent went to retail investors, 57 per cent to banks, institutional investors or company employees.

At first things went excellently for Telekom and its investors. The share price rose and rose. On 28 June 1999 Telekom issued a second tranche of shares at 39.50 euros and raised around ten billion euros from the placement. On 6 March 2000 the share hit its all-time high of 103.50 euros.

What is at stake

The history of the damage

Why the share could rise now

What investors should bear in mind