BERLIN -- Postponing an initial public offering could almost be considered in vogue these days, but most companies still blanch at the idea of pulling the plug on a stock market listing.
Few firms care to admit their offering isn't ready for the market or isn't compelling enough to ride out rough conditions, so you could almost sense the relief with which
announced its near $50 billion bid for
was prompting the company to delay the flotation of its wireless unit
. It would just be too complicated, the company said.
Germany's former state-run monopoly had planned to float 10% of T-Mobile in both Frankfurt and New York this fall, but due to the pending VoiceStream bid, Deutsche Telekom stated, "The task of preparing the necessary listing prospectuses
has become considerably more complex," pushing back the IPO until at least next year.
The complications may be a blessing in disguise. As tricky as it might be, VoiceStream offers T-Mobile a convenient excuse for sidestepping a market that has been less-than-ideal for telecom stocks. Most major European telcos have tumbled from their highs in recent months as investors reassessed the costs of developing third-generation, or 3G, wireless services, which will allow all manners of mobile Internet connectivity. And T-Mobile is currently coming under even more scrutiny as it bids for its most important 3G license in the ongoing German auction.
On Wednesday, Deutsche Telekom was up 1.96 euros, or 4.4%, at 46.70 ($42.10). Its New York-traded ADRs were up 1 1/8, or 2.8%, at 41 7/8.
In its second week, Germany's auction for licenses to offer cell phone users flashy multimedia applications -- via the Universal Mobile Telecommunications System, or UMTS -- broke the 30 billion mark level ($13.8 billion). That's still less than what observers had been expecting after the U.K. UMTS auction brought in $35 billion last spring, but more than the government had recently hoped for after the bidding field dwindled to seven companies and consortia for between four and six licenses.
Every day that the auction continues, the shares of the bidders come under pressure as the costs of the licenses climb. Among the bidders for the German licenses:
via its subsidiary
along with its partner
; and Deutsche Telekom.
While many observers believe UMTS will offer great money-making opportunities for telcos down the road, investors are sure to cringe if the German auction is beginning to head the way the British bidding went. That's why T-Mobile's delayed IPO is probably more than OK with Deutsche Telekom Chairman Ron Sommer.
Certainly if Deutsche Telekom ended up paying gobs of cash for a must-have German UMTS license, it wouldn't have gone over particularly well with potential T-Mobile shareholders only months later.
But even without a conspiracy there's still certainly plenty of irony to go around. T-Mobile's IPO is supposed to help pay for acquisitions and the high costs of obtaining UMTS licenses. But if the price of obtaining a German license got out of hand, it could torpedo the IPO, had it gone ahead as planned this fall.
And at the moment the German UMTS auction has the potential to bring in quite a bit more for the finance ministry's coffers. That's because no bidder has yet dropped out and it remains unclear how ambitious the telcos are. By delaying the IPO until next year there will be no risk of having a hefty UMTS price tag fresh in the minds of potential T-Mobile investors this fall, but it will also deny Deutsche Telekom funds that could be used for acquisitions other than VoiceStream or in the upcoming French and Italy UMTS contests, which will be key to developing a pan-European presence.
"I think it's a disappointment that they've had to delay
T-Mobile IPO for VoiceStream," says Douglas Wight, an analyst for
in London. "It's important they get the cellular acquisition currency
from the IPO in order to expand the business further, and frankly the sooner they do that the better." Commerzbank has had an investment banking relationship with Deutsche Telekom in the past three years.
Not that Sommer will be completely unable to rustle up the necessary cash for licenses outside Germany or for another fantastic takeover opportunity should the need arise. But when the T-Mobile IPO likely moves ahead next year, he had better hope he has a significant UMTS footprint to crow about, or investors might be just as reluctant to buy shares as they would be with a hefty German auction bid fresh in their minds.