Shareholders sue Deutsche Telekom

8 Apr 2008

Spiegel Magazine reports that some 16,000 frustrated shareholders of German incumbent telco Deutsche Telecom (DT) have brought a class action case against the company, claiming they were duped into buying shares by missing or misleading information ahead of a share issue in 2000. The claimants, many of whom put their life savings into what they saw as a safe investment, are suing DT for up to EUR80 million (USD125 million). The issue price was EUR66.50 per share, around six times the current share value of EUR11.38. The operator denies their accusations that it overvalued its property assets in the issue prospectus, and that it concealed its plans to buy US wireless company VoiceStream for about USD35 billion. The acquisition was agreed a month after the subscription period ended. ‘The advertising strategy at the time and the current line of the defence don’t fit together,’ said Andreas Tilp, a lawyer for the plaintiffs. He added that during its three capital issues in 1996, 1999 and 2000, DT had advertised its shares as a safe-return ‘people’s share’, but had kept silent about the substantial financial risks it faced. Now its strategy is to portray the share as a speculative investment, said the lawyer.

In 2005, DT settled with US shareholders who had sued for USD120 million over the same issues, but did not admit any wrongdoing. The telco has ruled out an extra-judicial settlement this time, saying that it is confident of winning the case, in which it is defending itself on 33 separate issues. In total, around 900 lawyers are representing the 16,000 or so shareholders, who have filed 2,770 claims over the sales.

Germany, Deutsche Telekom (DT)