Deutsche Telekom: The Bond Issuer That Infuriates European Investment Bankers

Strategic Insights -

Deutsche Telekom, once a stalwart German state-owned telecom company, has sparked controversy among European investment bankers due to its uncompromising approach to bond issuance. In 2006, the company succeeded in raising €1.5 billion through a bond sale, arranged by Deutsche Bank, Goldman Sachs, and Societe Generale, which was twice subscribed. However, the deal was not without criticism, with some bankers complaining that DT's practice of setting the best possible price for its bonds, rather than deliberately underpricing them, makes them feel like "children."

This incident highlights a broader trend in the debt capital markets, where competition among banks has led to a situation where issuers, like Deutsche Telekom, are becoming increasingly assertive in their dealings with bankers. The company's treasury department has adopted a policy of pricing its bonds just one or two basis points away from what the market will bear, taking a tough stance on banking fees. This approach has resulted in a situation where DT's bonds have performed relatively well in recent years, but has also left some bankers feeling frustrated.

Key Takeaways:

  • Deutsche Telekom has earned the nickname "worst issuer" due to its uncompromising approach to bond issuance, which has led to criticism from investment bankers.
  • The company's treasury department has adopted a policy of pricing its bonds just one or two basis points away from what the market will bear, taking a tough stance on banking fees.
  • This approach has resulted in a situation where DT's bonds have performed relatively well in recent years, but has also left some bankers feeling frustrated.
  • The incident highlights a broader trend in the debt capital markets, where competition among banks has led to a situation where issuers are becoming increasingly assertive in their dealings with bankers.
  • Corporate investment grade bond issuance rose 26 percent in Europe last year, outpacing associated revenues growth of 18 percent.
  • The rise of DT's bond issuance is not an isolated incident, but rather reflects a larger trend in the market, where issuers are becoming more assertive and demanding in their dealings with bankers.

Statistics:

  • €1.5 billion: The amount Deutsche Telekom raised through its bond sale in 2006.
  • 26 percent: The growth in corporate investment grade bond issuance in Europe last year.
  • 18 percent: The growth in associated revenues for corporate investment grade bond issuance in Europe last year.
  • €2,203 billion: The total value of debt capital markets (DCM) deals executed in Europe alone in 2006.
  • 23 banks: The number of banks DT has partnered with to sell bonds.
  • $2 billion: The equivalent value of Deutsche Telekom's bond sale in US dollars.
  • £1 billion: The equivalent value of Deutsche Telekom's bond sale in British pounds.

Sources:

  • Euroweek
  • Dealogic
  • Deutsche Telekom