Investment group buys Deutsche Telekom stake

U.S. investment group Blackstone will buy 4.5 percent of Deutsche Telekom AG, Europe’s biggest phone company, for 2.68 billion euros ($3.3 billion) from a government-owned bank, the parties said Monday.

Blackstone has agreed to buy 191.7 million shares in Deutsche Telekom from Germany’s KfW bank for 14 euros each ($17.27), a 2.6 percent premium on Friday’s closing price, KfW said.

U.S. shares of the Bonn, Germany-based company jumped 71 cents, or 4.2 percent, to $17.55 in morning trading on the New York Stock Exchange.

New York-based Blackstone, one of the world’s biggest private equity firms, said it would be a long-term investor in the former German telephone monopoly. It pledged to hold the shares for at least two years.

“Our intention is to support the company and its management in executing a strategy of long-term value creation for all stakeholders in a collaborative environment,” said Stephen Schwarzman, Blackstone’s chairman and chief executive.

The role of foreign financial investors is sensitive in Germany, where some politicians have accused them of forcing German firms to close factories or slash jobs in pursuit of a quick profit.

However, Finance Minister Peer Steinbrueck on Monday welcomed Blackstone’s pledge to take a long view and said its investment was a vote of confidence in the much-maligned company.

“This is good day for Deutsche Telekom and its shareholders,” Steinbrueck said.

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Deutsche Telekom said the sale was positive also because of Blackstone’s experience as an investor in the telecommunications sector and because it broadened its shareholder base.

Deutsche Telekom’s shares were worth more than 100 euros each in 2000 at the height of the high-tech boom and their plunge amid shrinking expectations for the sector hurt many small investors in Germany.

Rivals, regulators and consumer groups have accused the company of charging inflated prices and restricting competition on its networks.

Deutsche Telekom, which owns cell phone operator T-Mobile, has announced plans to cut 32,000 jobs by 2008 as it reorganizes its operations and its traditional fixed-line business shrinks.

KfW, which places shares in former state-owned companies with investors, said the transaction will leave it holding 17.3 percent of Deutsche Telekom. The German government holds another 15.2 percent directly, meaning the state’s overall stake will fall to 32.5 percent.