Deutsche Telekom AG has begun the long process of reducing its 64bn euro ($63.4bn) debt burden with the sale of 100 million shares in its T-Online ISP for 610m euros ($603.9m).
The offer of shares to institutional investors was three times over-subscribed. An option of an additional 20 million shares may also be exercised by the lead managers Goldman Sachs and Dresdner Kleinwort Wasserstein.
The sale cuts Deutsche Telekom’s stake in T-Online to 73.5% from 81.7%, and is the first sign of the determination of new CEO Kai-Uwe Ricke to cut the company’s debt.
Though a drop in the ocean compared to its total debt burden, the move is an early signal to the market that only two weeks after Ricke’s appointment, the new regime is determined to take tough action to dispose of assets to cut a debt burden that has crippled the company’s share price.
At the time of its IPO during the dot-com frenzy of April 2000, T-Online’s shares were priced at 27 euros ($26.7) and the current tranche of shares were sold at 6.10 euros ($6.10), reflecting the change in sentiment.
Though still heavily loss-making, T-Online remains Europe’s largest ISP and has enjoyed particularly strong growth in broadband access. There have been strong market rumors that Deutsche Telekom’s next move will be to sell a 10% stake in its T-Mobile wireless arm.