Orange and D Telekom put EE float on hold
The flotation of EE, Britain’s largest mobile operator, has been put on hold by Orange and Deutsche Telekom, after the joint owners concluded they would secure a higher valuation for the business when its 4G telephone services take off. Orange and Deutsche Telekom – which has also been linked with a sale of its US business this year – had been working on options for a partial sale of EE for more than a year. However, on Thursday, people with knowledge of the decision said a strategic review by the companies had concluded that this was not the time to sell EE – based on a belief that its valuation will rise in future as more people adopt higher margin mobile data packages in the nascent 4G market. The move to shelve what could have been London’s largest initial public offering represents an unexpected reversal for a booming market, which had attracted a growing number of companies seeking to raise capital. Analysts had estimated that EE could carry an enterprise value of more than £10bn. Last year, a strong recovery in European IPOs last year saw volumes more than double to $35bn, according to Thomson Reuters – with the UK at the forefront of the revival. But while the decision may come as a disappointment to the investors and financial advisers keen to be involved a flotation of this size, it may spark renewed interest among private equity groups that had been hoping to derail the process with bids of their own. In a statement to the FT, Deutsche Telekom and Orange said: "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 co-operation in the UK market." EE executives are confident that the company can maintain its lead in the 4G market, having signed up 2m 4G customers in the UK, where it operates the Orange and T-Mobile brands. However, one person with knowledge of the situation said the potential valuations being discussed among some investors had not been as high as the owners wanted. Analysts have also said that Deutsche Telekom might be reluctant to reduce the scale of its global business too quickly through a sale of both US and UK operations. Sprint, which is owned by Japan’s SoftBank, is rumoured to be preparing a bid for a majority stake in T-Mobile US early in 2014. The German group has reduced its state in T-Mobile US to about two-thirds. EE has also been on the list of European companies linked to a bid from AT&T, although it would be second choice for the US telecoms company behind Vodafone according to many analysts following the situation.