BONN — The privatization of Deutsche Telekom means much more than just fresh capital for a state-owned phone giant that faces deregulation and competition in just over a year.
It also appears likely to serve a broader goal: bringing ordinary Germans into the stock market. The government wants to woo Germans out of the comfort zone of savings accounts and bonds and into the bracing world of equities.
If the $15 billion stock float accomplishes this, it will be important for two reasons: (1) Lack of risk capital keeps companies here from expanding and thus creating jobs, and (2) the state-run pension system is coming under severe strain as ever fewer workers support ever more retirees. If more Germans were more comfortable with stock ownership, it would be easier for companies to finance expansion by selling shares. And more people would be saving for retirement with equities, not just fixed-income investments.
So far, it appears the T-shares, as the Deutsche Telekom stock is known, are off to a strong start.
Despite being the largest stock offering in European history, it will be "significantly oversubscribed," predicts Telekom chairman Ron Sommer. More than 3 million individuals have signed up for Telekom's "investor information forum," which puts them at the head of the line to buy the 500 million shares being offered. Mr. Sommer says "the success of the investor information forum dispels the notion of Germans as stick-in-the-muds when it comes to stocks."
Telekom spokesman Jrgen Kindervater won't say how many of the forum registrants have actually ordered shares.
The climate is certainly right. It's a bull market. Interest rates are low. The T-shares are being offered to retail investors with a number of incentives, including rebates and a "fidelity bonus" for long-term shareholders. And the whole country has been subjected to an advertising blitz "as never before," as Commerzbank spokesman Peter Pietsch in Frankfurt puts it, not only from Telekom itself but from virtually every bank in Germany. (Banks here sell stocks.) Financial houses are offering telecommunications-sector mutual funds and other instruments for new investors. Commerzbank, for instance, has something called "Safe-T," whereby the bank protects against capital loss from share ownership but keeps the dividends - a sort of capitalism with training wheels.
Mr. Pietsch is philosophical about the prospect that some investors will hold T-shares only long enough to see some price appreciation and then back out of the market. "Later on, there may be another occasion for them to invest again."
But if a market downturn gives investors cold feet later on, that will mean a lot of cold feet. Germany was on the verge of overcoming its equity anxiety during the early 1960s, until stock markets stumbled over the Cuban missile crisis, and then again before the 1987 stock-market crash.
Telekom has just announced the price range for its stock - 25 to 30 marks ($13 to $20) a share - for the "book-building phase," which began Oct. 22. Initial orders are being taken before trading officially begins on German exchanges and the New York Stock Exchange Nov. 18. Analysts now expect the official opening price to be closer to 30 marks - higher than expected earlier. The immediate news of the price range Oct. 21 sent Telekom shares up as high as 39 marks on the "gray market."
Despite this enthusiasm, some international investors see Telekom as overpriced at 30 marks. The company has problems: debt, overstaffing, competition on the way, and the need to rewire eastern Germany, to name four.
"I think it will go very well, because it's Germany," says Philip Townsend, an analyst at Smith Barney in London.