In Frankfurt, Deutsche Telekom is stepping up the pace, whilst the market is in turmoil following Elliott’s entry
The activist fund is reportedly opposed to the merger between the group and its US subsidiary, T-Mobile
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(Il Sole 24 Ore Radiocor) - Deutsche Telekom shares are surging in Frankfurt on rumours that Elliott Investment Management is set to acquire a substantial stake in the company. The telecoms group’s shares are currently among the top performers on the DAX 40 index, rising by around two points. Although no confirmation has yet been received from Elliott (even though German regulations require the disclosure of any stake exceeding 3%), his entry into Deutsche Telekom could become a key factor in decisions regarding the future of the German company.
According to reports by Bloomberg, the activist fund is reportedly opposed to the merger between the group and its US subsidiary T-Mobile (-1.69% in pre-market trading on Wall Street) and would prefer new share buybacks or other initiatives aimed at creating value for shareholders. This stance stands in stark contrast to that of Deutsche Telekom’s chief executive, Tim Hoettges, who has been working for months on a merger with T-Mobile – in which the group holds a 53 per cent stake – to create the world’s largest listed telecoms company.
According to the publication Semafor, this plan has raised some concerns amongst T-Mobile’s senior management and has not sparked much enthusiasm on the stock market either. In fact, over the last 12 months, Deutsche Telekom’s share price has fallen by around 7 per cent, whilst T-Mobile’s share price on Wall Street has dropped by 25 per cent, with a market capitalisation now standing at around 200 billion dollars.
For the merger to go ahead, it would then need to secure the approval of the German government – which controls around 28 per cent of Deutsche Telekom – as well as political approval from Washington, at a time of growing tensions between US President Donald Trump and European leaders, including German Chancellor Friedrich Merz. In short, as the experts at J.P. Morgan summarise, this is “an extremely complex transaction, to which most investors have been opposed”. The entry of the Elliott Fund – which, under the leadership of Paul Singer, is often inclined to push for change in its major portfolio companies – could further shake things up.
