Tim Höttges, Deutsche Telekom's CEO, doesn't seem to mind speculating about BT's future ownership structure. Neither does he give much away when the subject crops up.

In a briefing yesterday, as reported by various news outlets, Höttges appeared in a typical wait and see mood.

Referencing the recent and out-of-the-blue £2.2 billion ($3.1 billion) investment in BT by France-based telecoms group Altice, controlled by billionaire Patrick Drahi – which made Altice the single biggest shareholder in the UK incumbent with a 12.1% stake – Höttges indicated that further and significant changes were afoot.

"I would say that in the next 12 months something is going to happen with the [BT] asset because the shareholder side is changing rapidly," he said.

If Höttges has a favoured approach for Deutsche Telekom, which was BT's biggest shareholder with a 12% stake before Altice came along, he was not saying. "We have a lot of optionality in the BT business," he said. "It's too early to make a decision. We are entertaining all options."

One of the options, which Höttges raised on Deutsche Telekom's latest earnings conference call in mid-August (as transcribed by Seeking Alpha), is to play the role of "kingmaker." This might imply selling Deutsche Telekom's BT stake to Drahi's Altice, so raising funds that could be channelled into debt reduction and helping the rollout of full fiber in Germany. "We have an asset where we have a lot to say and a lot of influence," added Höttges.

On the other hand, the Deutsche Telekom CEO thought BT was "highly undervalued." Since acquiring its BT stake in 2016, Deutsche Telekom has seen the share price tumble by more than half, although there's been something of pick-up this year (despite a recent decline after BT posted its Q1 results).

Höttges said on the call, unsurprisingly, that he would definitely be having discussions with Drahi.

Already on M&A maneuvers

News emerged this week that Deutsche Telekom was selling its Dutch operating business, T-Mobile Netherlands, to private equity firms Apax and Warburg Pincus for €5.1 billion ($6.1 billion). After sharing proceeds with Tele2, which owns 25% of T-Mobile Netherlands, Deutsche Telekom stands to collect €3.8 billion ($4.5 billion).

The sell-off highlights Deutsche Telekom's need for extra funds. Following a splurge on spectrum in the US after the merger of T-Mobile and Sprint, plus continued full-fiber investment on its home turf in Germany, Deutsche Telekom's capital expenditure more than doubled year-on-year in the first six months of 2021, to about €16.6 billion ($19.7 billion). Ninety percent of that was spent in Germany and the US.

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Net debt equals about three times its annual earnings, well outside Deutsche Telekom's comfort zone ratio of 2.25 to 2.75.

The T-Mobile Netherlands sale is unlikely to make much of an impact on Deutsche Telekom's finances, however, which perhaps makes the BT kingmaker option the most likely bet. Deutsche Telekom is increasing its stake in T-Mobile US by 5.3 percentage points, to 48.4%, through a transaction with SoftBank, T-Mobile's other big owner. In exchange for those shares, SoftBank picks up a 4.5% stake in Deutsche Telekom as well as $2.4 billion in a cash payment.

The arrangement effectively chews into the cash proceeds from the T-Mobile Netherlands sale and leaves a relatively small amount for paying off group debts or reinvestment elsewhere.

— Ken Wieland, contributing editor, special to Light Reading