T-Online goes cheaply

Telekom boss Ron Sommer hopes to build up his war chest

European telecoms giant Deutsche Telekom has set a low price for its internet subsidiary T-Online, following a string of poor stock market debuts of other internet companies.

T-Online shares will be on offer for between 26 to 32 euros. Six months ago a share price close to 50 euros had been mooted.

The firm is Europe's largest internet service provider. By the end of March it boasted 5.3m customers, up from 4.2m at the end of 1999.

Deutsche Telekom hopes to raise between 2.6bn and 3.2bn euros through the stock issue, giving it ample ammunition for its plans to expand internationally.

Private investors have until 14 April to place orders for the 92 million shares that will be issued to the public.

Another eight million shares are earmarked for an employee share purchase plan, and 14 million will be placed with institutional investors.

This amounts to just 9% of T-Online's share capital.

Low market expectations

The low issue price was prompted by the disappointing performance of a string of other internet companies that recently offered their shares on the stock market.

Dutch internet service provider WorldOnline saw its price fall to 50% of the offer price. Lycos Europe, which is listed on the Neuer Markt, delivered an underwhelming performance as did Lastminute.com, an online retailer traded on the London Stock Exchange.

Telekom's chief executive Ron Sommer said: "We consider this range to be fully appropriate, especially in the light of the valuation of competitors."

According to surveys, one in five Germans hopes to buy shares in T-Online. Private investors will have to place a minimum order of 50 shares.

T-Online shares will be traded on the technology-heavy Neuer Markt, but Deutsche Telekom hopes to list its subsidiary in the United States as well.

The flotation of Deutsche Telekom on the stock exchange has been seen as a turning point in the country's investment scene, persuading many Germans to become share holders for the first time.