Deutsche Telekom property arm likely to raise DM1

Deutsche Telekom, the German telecoms group, is likely to receive just DM1 – 46 cents – from the accelerated sale of part of its property management subsidiary DeTe Immobilien.

The subsidiary is to be split into asset management and facility management arms early next year, but a letter of intent for the sale of the facility management arm is to be signed by November of this year, Financial Times Deutschland has learned. Intensive negotiations are under way with three potential bidders for the facility management arm. The companies interested are Siemens, the German technology group, Thyssen-Krupp, the German steel and trading group and Trammell Crow Savills, a US-British property joint venture.

The whole of DeTe Immobilien, which is Telekom’s second-largest subsidiary after T-Mobile International, its mobile phone arm, is valued by analysts at about DM2.5bn to DM3bn ($1.1bn to $1.4bn). According to Gerhard Niesslein, managing director, it will post losses of up to DM380m on turnover of almost DM8bn this year.

But DeTe Immobilien has grave financial problems. According to an internal analysis, costs are expected to exceed revenues by about 30 percent this year.

All three of the parties interested in bidding for the facilities management arm were said to be offering only the symbolic price of DM1. Telekom will have to pay the costs of restructuring DeTe Immobilien, the bulk of which will accrue from a programme of redundancies for 2,500 of its 9,500 employees. One party said it had “no desire to pay for Telekom’s mistakes.” Ron Sommer, Telekom’s chief executive, is nonetheless keen to press ahead with a sale as he expects new owners to bring a fresh impetus to turnover and profitability.

Potential investors are demanding a 35 percent stake in the facility management arm in the first instance, with an option to take full control of the company after two years. Siemens is thought by observers to have the best chances of striking a deal, as it has long-standing relations with Telekom. Reuters