Ad hoc notification from Deutsche Telekom in accordance with § 15 of the Securities Trading Act (WpHG)
Deutsche Telekom and AT&T today announce that AT&T will buy T-Mobile USA, an affiliate of Deutsche Telekom, for 39 billion US-Dollar. This has been agreed by the boards of the two companies today. Deutsche Telekom will receive 25 billion US-Dollar in cash and 14 billion US-Dollar in shares of AT&T. AT&T has the right to increase the portion of the purchase price paid in cash by up to 4.2 billion US-Dollar with a corresponding reduction in the stock component. With an interest in AT&T of up to 8 percent (based on current stock price) Deutsche Telekom will become the biggest minority shareholder in the leading US-company of the telecommunications´ industry.
The value of the transaction is approximately 28 billion Euro, whereof approximately 18 billion Euro are in cash and approximately 10 billion Euro in stock (based on current exchange rates). Thus T-Mobile is valued at seven times the adjusted EBITDA of the business year 2010 in this transaction.
After the closing of the transaction Deutsche Telekom plans to use approximately 13 billion Euro of the proceeds to reduce its debts. Approximately 5 billion Euro are planned to be used for share buybacks after closing and required resolutions in accordance with the legal requirements. For Deutsche Telekom this transaction leads to a further consolidation of the balance sheet. Pro forma the ratio for net debt to adjusted EBITDA in 2010 would have fallen to 1.9x from 2.2x.
There will be no change regarding shareholder remuneration policy which has been set for 2010-2012. We will continue to pay out 3.4 billion Euros, on an annual basis consisting of a minimum dividend of 70 Euro-Cents plus share-buybacks in accordance with the legal requirements. The planned share-buybacks of approximately 5 billion Euro after closing the transaction are to be seen in addition to this.
The guidance for 2011 remains unchanged. For the financial year 2011 Deutsche Telekom expects an adjusted EBITDA of around 19.1 billion Euro. The free cash flow is expected to be stable to slightly growing from the 2010 level of 6.5 billion Euro.
(The guidance is based on the assumption of constant currencies compared with the average exchange rates of 2010. The guidance for the free cash flow is excluding € 0.4 billion cash settlement for PTC in Q1 2011. The annual dividend/ shareholder remuneration is subject to necessary AGM-approval and board resolution.)
The agreement between the two companies includes as well that Deutsche Telekom is to receive one seat on the board of AT&T.
The merger still needs to be approved by both, the US Department of Justice (DoJ) and the US regulation authority Federal Communications Commission (FCC). The closing of the transaction is expected to take place in the first six months of 2012.
This ad hoc release contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These also include statements on market potential, statements on finance guidance, as well as on the dividend outlook. They are generally identified by the terms "expect," "anticipate," "believe," "intend," "estimate," "aim for," "goal," "plan," "will," "strive for," "outlook," or similar expressions and often include information that relates to net revenue expectations or targets for adjusted EBITDA, profit or loss, earnings performance, and other indicators, as well as personnel-related measures and workforce adjustments. Forward-looking statements are based on current plans, estimates, and projections. They should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control, including those described in the sections "Forward-Looking Statements" and "Risk Factors" of the Company's Form 20-F annual report filed with the U.S. Securities and Exchange Commission. Among the relevant factors are the progress of Deutsche Telekom's workforce reduction initiative, the restructuring of operating activities in Germany, and the impact of other significant strategic or business initiatives, including acquisitions, dispositions, business combinations, and cost reduction measures. In addition, regulatory decisions, stronger than expected competition, technological change, litigation, and regulatory developments, among other factors, may have a material adverse effect on costs and revenue development. Furthermore, changes in the economic and business environments – for example, the current economic slump – in markets where we, our subsidiaries, and affiliates operate, the enduring instability and volatility on the global financial markets, as well as exchange rate and interest rate fluctuations can also adversely affect our business development and the availability of capital at favorable terms. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom's actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom can offer no assurance that its expectations or targets will be met. Deutsche Telekom does not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise. Deutsche Telekom does not reconcile its adjusted EBITDA guidance to a GAAP measure because it would require unreasonable effort to do so. As a rule, Deutsche Telekom does not predict the net effect of future special factors due to their uncertainty. Special factors and interest, taxes, depreciation and amortization (including impairment losses) can have a significant effect on Deutsche Telekom's results.
In addition to figures prepared in accordance with IFRS, Deutsche Telekom presents non-GAAP financial performance measures, including EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBT, adjusted net profit, free cash flow, gross debt, and net debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.