(Bloomberg) — Deutsche Telekom AG will use proceeds from the sale of its Dutch unit to acquire a greater stake in T-Mobile US Inc., deepening its shift to the U.S. market where it leads the industry in the next generation of mobile technology.
Warburg Pincus and Apax Partners will purchase T-Mobile Netherlands for 5.1 billion euros ($6.1 billion) from Deutsche Telekom and venture partner Tele2, which owns a 25% stake, the private equity firms said Tuesday. Bloomberg reported on Monday that the German company was nearing a deal and that the private equity consortium was a strong contender.
Deutsche Telekom will use some of the proceeds to help fund a deal with SoftBank Group Corp. to increase its holding in the U.S. The Japanese company said it will acquire a 4.5% stake of Deutsche Telekom and sell some of its T-Mobile US shares. The deal will leave Deutsche Telekom with a 48.4% stake in T-Mobile US, just short of its goal to acquire a majority holding.
The German company’s Chief Executive Officer Tim Hoettges also said in a conference call on Tuesday that Deutsche Telekom will take action on its 12% holding in the U.K.’s BT Group Plc sometime in the next year.
T-Mobile US accounts for nearly two-thirds of Bonn-based Deutsche Telekom’s sales. The unit raised its forecast for subscriber growth in July and plans to build out capacity, targeting new businesses such as driverless taxis.
Deutsche Telekom shares rose 0.5% to 17.98 euros at 10:32 a.m. in Frankfurt trading. The stock has gained 20% this year. SoftBank shares closed 9.9% higher.
Share Swap
SoftBank will swap part of its T-Mobile US stake for an initial 225 million shares of Deutsche Telekom. The German company will then use $2.4 billion of proceeds from the Dutch sale to pick up another 20 million T-Mobile shares, according to a statement.
Deutsche Telekom intends to offset potential dilution to earnings per share through share buybacks in the medium term, Hoettges said on the call.
For Warburg and Apax, their purchase will be one of the largest transactions in the European telecom sector this year, according to data compiled by Bloomberg. Warburg Pincus and Apax previously teamed up in 2019 to take U.K. satellite company Inmarsat Plc private in a $3.4 billion buyout deal. The value of Tele2’s stake is about 860 million euros.
The sale had also attracted interest from Apollo Global Management Inc. and Indian billionaire Mukesh Ambani’s Reliance Industries Ltd., Bloomberg News has reported.
Private equity firms are often drawn to telecom assets as they can gain control of underlying infrastructure, which offers steady long-term returns. In May, the Dutch telecom group Royal KPN NV said it had rejected an “unsolicited high-level approach” from investment firms EQT AB and Stonepeak Infrastructure Partners.
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