Deutsche Telekom, Orange hold fire on EE IPO

Deutsche Telekom and Orange have put on hold plans to float their joint venture EE amid speculation that valuations of the UK's largest mobile operator were not high enough.

"Deutsche Telekom and Orange have concluded the 2013 strategic asset review of EE and are very satisfied with EE's progress and financial performance under the leadership of CEO Olaf Swantee and his management team," the companies said in a joint statement sent to FierceWireless:Europe on Friday.

"Following this review, the shareholders have both agreed that the best option for value creation is to maintain the current ownership structure for the time being, and they look forward to continuing their successful cooperation in the UK market," the statement added.

Swantee said only last year that a UK initial public offering or a sale to a private equity company are the two main options open to the mobile operator, and commented that the advantage of an IPO is that the company would be perceived as being more British than it is today.

Citing unidentified sources, the Financial Times said the strategic review had nonetheless concluded that this was not the right time to sell EE, which some analysts estimate has an enterprise value of £10 billion (€12 billion or $16.3 billion).

The sources suggested that Deutsche Telekom and Orange believe EE's value will rise once more people have subscribed to its LTE services. However, the FT noted that not all investors are as convinced as EE's owners that the company will maintain its lead on the UK LTE market.

EE reported at the beginning of 2014 that it has already hit the 2-million subscriber market for its "4GEE" mobile data services. However, the company faces growing competition from Vodafone UK, O2 UK and now 3 UK, which have all launched their own respective LTE offerings.

According to the FT report, some analysts suggest Deutsche Telekom might be reluctant to reduce the scale of its global business too quickly through a sale of both US and UK operations.

Indeed, the German operator has just moved control of its 67 per cent stake in T-Mobile USA to a Netherlands-based holding firm, Reuters reported, citing a disclosure by the operator to US regulators. This has sparked further speculation that Deutsche Telekom is lining up its ducks for a disposal of its US business in order to focus on its European operations.

Indeed, US operator Sprint is reported to be close to making an offer for T-Mobile USA in a deal that would net the German incumbent at least US$20 billion (€14.7 billion).

For more:
- see this Reuters article
- see this Financial Times article (sub. req.)
- see this separate Financial Times article (sub. req.)

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