Deutsche Telekom AG (ADR)(OTCMKTS:DTEGY) To Consider Sale of Dutch Mobile-Phone Unit

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Deutsche Telekom AG (ADR)(OTCMKTS:DTEGY) is considering the sale of Dutch mobile-phone segment in order to raise capital to buy wireless frequencies in the U.S. and reduce debt. A sale of T-Mobile Netherlands will help company to get almost seven times the target’s EBITDA. It suggests the business could be worth as much as $5.7 billion based on 2014 numbers. This asset could fetch interest from firms including Liberty Global Plc and other private-equity firms.

The details

Deutsche Telekom is working together with Credit Suisse Group AG (ADR)(NYSE:CS) on the sale process, which is at a beginning stage. No final plan has been made and company could still say a no to sale. The shares of Deutsche gained as much as 2.60% in yesterday’s trading session. They added 0.45 to close at $17.74. Representatives for Deutsche Telekom, Liberty Global and Credit Suisse declined to comment.

The competition in the Dutch telecom market of seventeen million people has increased recently, with Royal KPN NV and the local firms of Vodafone Group Plc, Tele2 AB and Deutsche Telekom all upgrading their system to enhance coverage. Ziggo, which was bought in 2014 by Liberty Global, also provides wireless services in the region.

With nearly 3.7 million clients, Deutsche Telekom comes in the list of leading mobile operators in the Netherlands. The company boasts a market share of 18.2%, behind Vodafone with 25.5% and KPN with 52%.

There are many reasons for Deutsche Telekom to seek a sale including loss of market share, increased competition from Tele2 and lack of convergent assets. Liberty Global appears a realistic acquirer because of its extensive countrywide cable network. Any deal need to get the approval of regulators. Deutsche Telekom marked its presence in the Dutch mobile-phone industry in 2000, buying a stake in a venture with Tele Danmark and Belgacom SA.

DTE

Deutsche Telekom AG (ADR) (OTCMKTS:DTEGY) enjoyed a minor rally yesterday as the stock opened with a sharp gap up and remained at the higher levels for the rest of the day. The stock ended the trading session with a gain of 2.6% with the volume of 219,000 remaining slightly lower than the daily average of 235,000. The volume pattern and the intraday selling at the higher levels raise some questions about the actual inherent strength of the bulls and the sustainability of the rise. The Diamond pattern seen on the long term chart denotes confusion about the long term trend in the mind of the investors.

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