Flames of Höttges’ BT love still flicker

Group Chief Executive (CEO) Timotheus Höttges reasserted designs on tighter absorption of BT Group within the Deutsche Telekom (DT) family, as he defended the decision to take shares in the operator via the 2015–2016 sale of former joint venture EE (Deutsche Telekomwatch, #40).

The Group’s recent Capital Markets Day saw Höttges acknowledge shareholder qualms over the diminished value of the 12% BT stake, and regretfully remark that “we thought at one point in time that this could be part of DT, and would strengthen our position”.

Höttges conceded that shareholders were right to “question” the move, following the huge share price decline that BT has suffered since the buyout (Deutsche Telekomwatch, #40, #71, and passim). “Maybe it was not the right assessment, and I’m not happy with the development for us as Deutsche Telekom, as a shareholder”, he said. Group Corporate Development Head (and central M&A hand) Thorsten Langheim admitted that DT had “got it wrong on BT”.

There remains the possibility that DT’s designs on BT have not disappeared altogether, however.

Looking forward, Höttges played down the possibility of an exit from BT — no doubt conscious that DT would have to take a major hit in any sale.

At the same time, he was noticeably quiet on the contrary possibility of DT exploiting BT’s vulnerability and upping its stake when it escapes a standstill arrangement on its holding in early-2019. Höttges played down the near-term possibility of major, cross-country M&A in Europe, but noted (unprompted) that “we still have the BT asset”.

“ It’s not the time to go out of that [the BT stake]… It’s now the time to see that all the measures, all the ideas, all the programmes — Novator [Project Novator, BT’s turnaround strategy] and the like — get implemented and secure the value of this asset and [grow] it over time, and then we will see what’s going on. It’s part of our pension fund. It’s working for us from a debt perspective here in the company. And it’s good where it is today, but [there is] nothing additional to say on M&A steps going forward. ” — Höttges.

DT has opening for BT collaboration reboot  as Patterson exits

Höttges may hope recent ructions in BT’s leadership open up greater possibilities to bring the operator closer to DT, and fulfil unrealised ambitions for broad and deep ties with the UK operator, spanning procurement, enterprise services, innovation, and elsewhere (Deutsche Telekomwatch, passim). Shortly after the Capital Markets Day, BT made the abrupt announcement that CEO Gavin Patterson is to leave the operator and take the bullet for its share price slump. A search is underway for a successor, and it is reasonable to expect that Höttges — who is portrayed as a particularly robust contributor on BT’s Board of Directors, as well as member of its Nominating & Governance Committee — to push for an appointment more amenable to DT and its plans for closer integration and collaboration between the two Groups. He will no doubt have some interesting ideas of executives that could provide a pair of safe hands for DT’s investment, and a fresh perspective on the trials and travails of modernising an incumbent operator (perhaps including departing DT Chief Financial Officer Thomas Dannenfeldt, or Olaf Swantee who was CEO of EE when it was a DT-Orange joint-venture). BT expects a replacement to be in place before the end of 2018.