DT CEO regrets BT buy but might double down anyway

Deutsche Telekom CEO Tim Höttges made headlines this week when he admitted that he wished he hadn’t bought into BT.

That in itself is noteworthy. But it’s even more interesting when you consider that his comments were published as e& once again increased its stake in Vodafone – another UK telco with a depressed share price.

Höttges told the Financial Times that taking a 12 percent stake in BT back in 2015 was his biggest ever mistake and indicated that he wants his money back…and naturally the news spread like wildfire.

Deutsche Telekom picked up its BT shares as part of the UK’s incumbent’s £12.5 billion acquisition of mobile operator EE. While EE’s other parent company Orange elected to take a 4 percent stake in BT and the rest in cash, Deutsche Telekom was pretty excited to become the largest single shareholder of the UK’s major integrated fixed and mobile player, seeing potential for the two companies to work together.

That never really materialised, and BT has lost a lot of its value since then; it is currently trading at just over £1.40, around a third of its February 2015 price. Hence Höttges’ consternation.

But that diminished share price now presents the German telco with an opportunity to recover its lost investment. As Höttges told the FT, BT is the cheapest telco on the market and has significant potential to increase its value. That means Deutsche Telekom could look to increase its stake further  and wait for the shares to recover, he said.

He also indicated that another option could be to partner with another big shareholder, but didn’t give any further information on what such a partnership would look like, or what it would hope to achieve.

It’s worth noting though that Deutsche Telekom is no longer BT’s top shareholder, that position having been taken by Altice, which – also keen to take advantage of BT’s price weakness – picked up a 12.1 stake in the operator in mid-2021 and raised it to 18 percent later in the year. That deal gave rise to a flurry of speculation that the company, owned by businessman Patrick Drahi, would at some point launch a takeover bid. There was also talk of Altice picking up Deutsche Telekom’s stake, a move that would have triggered a mandatory takeover offer.

Höttges played his cards fairly close to his chest at the time, as he is doing now, but in September 2021 was quoted as saying that “something” would happen with Deutsche Telekom’s BT stake within 12 months. Clearly that something never materialised.

Thus it is with a level of caution that we approach the exec’s latest comments on the matter. He seems determined to “get that money back,” as he told the FT. “There will be a time when we will do a deal,” he said. But this time gave no indicative timeframe.

Much will likely depend on BT’s share performance in the coming months, or even years.

Deutsche Telekom has doubtless got half an eye on the situation at Vodafone, which is attracting bargain hunter investors as a result of its own share price being in the doldrums.

The most noteworthy is United Arab Emirates-based operator group e&, which this week added a further 1 percent to its holding in Vodafone, taking it to 14 percent. The telco started buying into Vodafone when it took a 9.8 percent stake in May last year for US$4.4 billion, and has increased its holding a number of times since, in fairly small increments. It has made the right noises about the possibility of commercial partnerships and joint R&D, but has also made no secret of the fact it is buying in at an attractive valuation and has “a clear opportunity to realise future value through potential capital gains and dividends.”

E&’s latest move comes just a fortnight after Liberty Global also took a punt on Vodafone, buying 4.92 percent for an undisclosed sum, clearly with a similar investment rationale. “We believe, like many others, that Vodafone’s current share price does not reflect the underlying long-term value of their operating businesses, or their announced consolidation and infrastructure opportunities,” said Mike Fries, CEO of Liberty Global, at the time.

Tim Höttges is certainly not the only one watching the share price of the UK’s legacy telcos right now.

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