Deutsche Telekom has agreed a multipronged deal with SoftBank that deepens its bet on the lucrative US market and will see the Japanese group take a roughly $5 billion (€4.2 billion) stake in Germany's dominant telecoms operator.
The arrangement was unveiled on Tuesday as Deutsche Telekom also announced the sale of its T-Mobile Netherlands unit to private equity groups Warburg Pincus and Apax in a deal valuing that business at €5.1 billion.
The transactions highlight how Deutsche Telekom is focusing on the US market where the merger of T-Mobile US, in which it is already the biggest shareholder, with SoftBank-backed Sprint last year has helped it compete with Verizon and AT&T.
Under the terms of the deal, Deutsche Telekom plans to issue 225 million in new shares to SoftBank at a price of €20, roughly a 12 per cent premium to the level they are currently trading. The shares equate to about a 4.5 per cent stake, making SoftBank Deutsche Telekom’s third-biggest shareholder behind the German government and BlackRock.
In exchange, the German group will increase its control of T-Mobile US by acquiring 45 million shares owned by SoftBank and said it planned to purchase a further 20m shares.
“This agreement furthers Deutsche Telekom’s strategic objective of increasing its ownership stake in T-Mobile US to more than 50 per cent in order to maintain long-term control and consolidation of T-Mobile US,” the German group said in a statement.
The deal will lift Deutsche Telekom’s stake in T-Mobile US by 5 per cent to 48.4 per cent.
Deutsche Telekom also said it would support a SoftBank proposal at its next annual meeting to elect Marcelo Claure, a senior executive at the Japanese group and the former chief executive of Sprint, to its board. SoftBank has agreed to a lock-up on its shares in Deutsche Telekom until December 2024.
The transaction marks SoftBank's most aggressive foray into corporate Germany, where it is best known for its start-up investment in online car reseller Auto1 and its controversial backing of the now-defunct and scandal-ridden payments company Wirecard.
It also highlights how the Japanese group remains enmeshed in the telecoms business, even as it tries to pivot to become an investment company focused on start-ups and public market stake building.
SoftBank shares rose 9.8 per cent to ¥6,943 (€53) in Tokyo trading on Tuesday, but remain 35 per cent below their high from earlier this year. Deutsche Telekom shares climbed 0.8 per cent to €18.05 in early trading in Frankfurt.
After the deals, SoftBank will continue to own 41 per cent of its Japanese telecoms subsidiary, 4.5 per cent of Deutsche Telekom and 3.3 per cent of T-Mobile US.
The sale of Deutsche Telekom's Dutch mobile unit comes after it sold its Romanian business to Orange and its Dutch towers unit to Spain's Cellnex over the past year.
It valued T-Mobile Netherlands at €5.1 billion, or 8.7 times its €582 million in earnings before interest, tax depreciation and amortisation in the year to June. Warburg Pincus and Apax will each own 50 per cent of the newly separated Dutch company.
At Warburg Pincus, the deal is being led by René Obermann, who was chief executive of Deutsche Telekom from 2006 to 2013.
Apax has previously bought stakes in the Danish communications group TDC and Orange Switzerland and Warburg Pincus has previously invested in German fibre group Inexio and Dutch cable company Ziggo. – Copyright The Financial Times Limited 2021