Written By In the world of business, tensions can arise between companies at any time. One such dispute has been playing out in recent weeks that involves telecommunications giant Deutsche Telekom and BT Group. The dispute centers around BT’s stake in EE, a UK-based mobile network operator. At stake is millions of euros worth of investments by Deutsche Telekom into EE, as well as control over 5G wireless technology in the UK. In this blog post, we’ll explore how the dispute started and what it means for both companies going forward.
How BT’s stake in Deutsche Telekom ended up in dispute
When BT acquired a stake in Deutsche Telekom back in 2001, it was seen as a way for the British telecoms giant to get a foothold in the German market. However, the investment soon turned sour, and BT’s stake in Deutsche Telekom ended up in dispute.
The main source of contention was how much BT should pay for its share of Deutsche Telekom’s mobile business, T-Mobile.BT argued that it should only pay a fraction of what Deutsche Telekom was asking, due to the fact that T-Mobile was losing money at the time. However, Deutsche Telekom refused to budge on its asking price, and the two companies ended up in court.
In the end, BT was forced to pay more than it wanted for its stake in T-Mobile. However, the whole ordeal left a sour taste in BT’s mouth, and it has since sold its entire stake in Deutsche Telekom.
What the Telekom boss wants
The Telekom boss wants his money back – and he’s not alone.
Many shareholders are unhappy with how BT’s stake in the German telecoms group ended up in dispute, and are now calling for a full investigation.
BT acquired a 12% stake in Telekom back in 2001, but the deal quickly turned sour as the two companies clashed over strategy.
In 2006, BT sold its stake to a consortium of private equity firms for €5.7 billion. But just two years later, Telekom announced it was taking a controlling interest in the same consortium – effectively buying back its own shares at a huge profit.
This move angered many investors, who accused Telekom of using the sale to prop up its share price. A number of lawsuits were filed, and an investigation was launched by Germany’s financial regulator.
Now, years later, theTelekom boss wants his money back – along with interest and damages. He has called for a full investigation into the matter, and has vowed to take legal action if necessary.
It remains to be seen whether he will be successful – but one thing is clear: The Telekom boss wants his money back.
How this affects BT’s share price
The news that Deutsche Telekom’s boss wants his money back has sent shockwaves through the City and BT’s share price has plummeted. This is because, as a major shareholder, Deutsche Telekom could force BT to sell assets or even break the company up.
Deutsche Telekom’s demands come after years of frustration at BT’s inability to turn around its UK business. The German company owns 12% of BT and is its biggest shareholder.
Deutsche Telekom is said to be angry at having to bail out BT with a £6bn loan in 2017. The loan was used to help fund BT’s acquisition of mobile operator EE.
BT’s share price has fallen sharply on the news and is now trading at around 200p, down from 240p at the start of the day.
What BT has to say about the situation
Deutsche Telekom AG Chief Executive Timotheus Hoettges said he would like to see British Telecom Group PLC’s 13.1 billion pound ($17.2 billion) stake in the German company returned, after BT announced it was writing down the value of that investment by £6.7 billion.
“We wish that this shareholder would return to us what belongs to us,” Hoettges said Tuesday on a conference call with analysts, according to a FactSet transcript.
BT acquired its stake in 2006 as part of a deal in which it sold mobile-phone operator O2 to Telefonica SA for £18 billion and took a minority holding in the German company.
But the value of the investment has been written down several times in recent years, and BT said last week that it would take another charge relating to the stake. At current market prices, the stake is worth about £6.4 billion.
Conclusion
The dispute between Deutsche Telekom and BT over the ownership of a stake in EE has been going on for some time now, and it shows no signs of slowing down. This case highlights the lengths that companies will go to protect their investments, as well as the complex network of laws and regulations necessary to ensure these kinds of disputes are handled fairly. No matter what the outcome is, one thing is certain: this dispute will set a significant legal precedent for future business dealings between large corporations.
