German investors have traditionally fought shy of investment in the stock market, seeing it as too risky, and stuck to other financial instruments such as bonds.
But German businessmen and bankers were delighted with what they saw as the start of a shareholder revolution at home. Ron Sommer, chief executive of Deutsche Telekom, said the company had been unusually successful in drumming up interest from private shareholders in Germany, attracting priority applications from 1.4 million.
Ronaldo Schmitz, a board member of Deutsche Bank, which speaks for the investment banks handling the global sale, said: "The private shareholder has been pronounced dead many times and now look, here he is... Germany's financial landscape has changed for the better." He said it was a good sign for other German companies considering going public.
The 285 million shares allocated to German retail investors - which are likely to be raised to 315 million - were three times subscribed.
The price was set at DM28.50 a share, slightly lower than the market had expected and below the top of the DM25-DM30 range announced in advance. There was a 50 pfennig discount for retail investors.
Small shareholders have been bombarded by Deutsche Telekom in a blanket advertising campaign offering discounts and special bonuses, in an attempt to create the same sort of public enthusiasm for equity investment that Mrs Thatcher strived for during the 1980s privatisations in Britain. Only 5 per cent of German private investments are held in shares.
Deutsche Telekom is Europe's biggest flotation and the second-largest in the world, with total applications worth DM100bn chasing DM 20bn of shares, in a privatisation marketing campaign modelled closely on those pioneered in Britain.
Two-thirds of the total of 600 million shares allocated - excluding 90 million kept back which are likely to be allocated later - went to Germany, with private shareholders receiving substantially more than institutions.
The US took 14 per cent of the issue, the UK 8 per cent, the rest of Europe 6 per cent and the Far East 5 per cent, so foreign investors received one-third of the total.
One impetus behind the growth in German private share ownership is the fact that, with interest rates in Germany and elsewhere at historically low levels, rates of return from bonds are low. German companies have also been focusing on dividend payments and trying to shed their uncaring image towards shareholders.
Mr Schmitz of Deutsche Bank said: "Banks are prepared to learn the lesson from the Telekom issue. There are important signs of liquidity in the market and Telekom shows us just what to do to activate this liquidity.
"There is a desire to create long-term shareholders and there is a need for incentives to keep investors interested. The banks are being invited to understand this issue as a huge opportunity."
Telekom shares, which will immediately take a dominant role in Germany's 30-share DAX stock market index, will begin trading on 18 November.
Nicole Cousins, telecoms analyst at Bank Julius Baer in Frankfurt, said she believed the lower-than-expected price for the issue meant there was a good chance of price gains once trading began.
"DM 28.50 is below our expectations, we thought it would come in at the high end of the range. Based on our benchmarks we thought it was fairly valued at DM30."
The chief financial officer of Deutsche Telekom, Joachim Kroeske, said that proceeds would be used to settle debts.Reuse content