The German government has raised 2.43 billion euros within a few hours with the sale of Telekom shares and intends to invest the money in the restructuring of the railroads.

The state bank KfW, which holds the package together with the federal government, placed 110 million shares in the Bonn-based telecoms group, reducing the state's stake from 30.0 to 27.8 percent, as it announced late on Monday evening. "The federal government will use the net proceeds it receives (...) to strengthen Deutsche Bahn AG's equity and expand the rail infrastructure in Germany in a forward-looking manner," explained the Federal Ministry of Finance. Minister Christian Lindner has budgeted around four billion euros from the sale of state shareholdings to renovate the rail network - he now has the money for sure.

In recent months, KfW had already sold 22.4 million Telekom shares unnoticed on the stock exchange "in order to participate in the favorable market development". The FDP-led Ministry of Finance has kept a low profile on whether and when it will allow further Deutsche Telekom shares to be placed on the market. The Federal Government's interest in Deutsche Telekom remains unchanged. The Federal Government and KfW "will remain joint central shareholders of Deutsche Telekom AG and will maintain the required level of shareholding", according to the statement. In any case, KfW may not sell any further Telekom shares in the next three months without the consent of the banks.

The shares were placed with large institutional investors at a price of 22.13 euros. This is only 2.5 percent less than the Xetra closing price of 22.64 euros. Discounts of three to seven percent are usual for such large share sales. The price is a good five percent below the annual high of 23.40 euros. The placement was organized by Deutsche Bank, J.P. Morgan and Morgan Stanley.

"In agreement with the Federal Ministry of Finance, KfW has once again taken advantage of the stable conditions on the stock markets in the first half of the year to take steps towards privatization," explained KfW Treasurer Tim Armbruster. As recently as February, it had disposed of a package of postal shares for EUR 2.17 billion - also in favor of Deutsche Bahn.

(Report by Hakan Ersen, Alexander Hübner and Christian Krämer; edited by Scot W. Stevenson; if you have any queries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets)).