The case will go down in legal history as the biggest of its kind: more than 15,000 shareholders are suing Deutsche Telekom in 2,200 separate cases. They accuse the telco of inflating the value of assets before it was privatised.

Investors feel there were misled about the value of Telekom's real estate holdings: some 35,000 buildings and plots of land, which were consistently overstated in each of Deutsche Telekom's share offerings during 1996, 1999 and 2000. However, shareholders were made aware of the problem only beginning of 2001. Subsequently, Deutsche Telekom shares went into freefall, losing 92 per cent of their value. It should be noted that 2001 and 2002 were exceedingly bad years on all the bourses for all European telcos.

Investors also feel cheated over Deutsche Telekom's planned acquisition of US mobile phone operator VoiceStream. The company paid $22.5bn (€17.2bn) for VoiceStream, a price seen as unrealistic by many analysts.

The investors have instructed 630 lawyers to file for around €100m ($130m) in compensation. Everyone involved in the privatisation of Deutsche Telekom, including former chief Ron Sommer and the underwriting banks, are held responsible.

In Germany there is no such thing as a class-action suit. The Frankfurt judge in charge of the proceedings must decide each case individually. To make this undertaking bearable for everyone, about ten cases will serve as a basis for most of his rulings.

In the court the judge today criticised the way Deutsche Telekom AG valued its real estate assets, saying the process the company used was insufficient. However, the judge also believes the valuation itself isn't necessarily wrong. The complainants must prove that a lower valuation would have been warranted. ®

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