Deutsche Telekom to reduce MTS holding

13 Mar 2003

Germany’s heavily indebted PTO Deutsche Telekom [NYSE: DT] has given its clearest indication yet that it intends to sell part of its holding in Russia’s largest wireless operator Mobile TeleSystems (MTS) this year, in what will be one of its largest disposals to date. DT, which is struggling to lower its debt of EUR61.1 billion (USD67.6 billion), has said it has reached an understanding with AFK Sistema whereby the Russian investment group will up its 40.4% stake in MTS to a majority holding, although the exact timing and the value of any deal have yet to be determined. The German heavyweight also intends to separately float 5% of the Russian operator ‘subject to market conditions’. In a week in which the German company posted a record loss of EUR24.6 billion, the news of the Sistema deal has failed to impress DT investors; its share price dipped 2.8% to close at EUR9.15 on Wednesday. DT has tried to quell concerns by saying it will not reduce its stake in MTS to below 25.1% and that it had secured guarantees from Sistema as a strategic investor, including the right of first refusal on any future share sales.

Germany