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IN RE DEUTSCHE TELEKOM AG SECURITIES LITIGATION

October 29, 2002

IN RE DEUTSCHE TELEKOM AG SECURITIES LITIGATION


The opinion of the court was delivered by: Sidney H. Stein, United States District Judge

OPINION & ORDER

Allan Kramer and Bruce Holberg have brought this consolidated securities class action individually and on behalf of all others who purchased ordinary shares of Deutsche Telekom stock in the form of American Depository Shares ("ADSs") pursuant to a registration statement filed with the Securities and Exchange Commission ("SEC") on May 22, 2000 and a prospectus dated June 17, 2000. Defendants currently include, in addition to Deutsche Telekom itself, various underwriters of the stock offering as well as Ron Sommer, at that time the chairman and CEO of Deutsche Telekom.

Plaintiffs have now moved for class certification pursuant to Fed.R.Civ.P. 23 and defendants oppose that certification unless four distinct subclasses are formed. Because the prerequisites of Fed.R.Civ.P. 23(a) have been met and the action is maintainable as a class action pursuant to Fed.R.Civ.P. 23(b)(3), plaintiffs' motion is granted. In addition, the Court, in its discretion, declines to certify subclasses at this time.

I. BACKGROUND

The background of this case is set forth in full in this Court's Opinion and Order dated February 20, 2002, In re Deutsche Telekom AG Sec. Litig., 00 Civ. 9475, 2002 WL 244597 (S.D.N.Y. Feb. 20, 2002), and familiarity with that decision is assumed. Only the facts central to this motion are set forth here.

As part of a global offering of 200 million ordinary shares of Deutsche Telekom stock, Deutsche Telekom filed a registration statement with the Securities and Exchange Commission on May 22, 2000 to sell 45 million ordinary shares of its stock in the form of American Depository Shares (ADSs). (Compl. ¶ 26). The registration statement contained a prospectus, the final version of which is dated June 17, 2000. (Compl. ¶ 1-2, 26.) Plaintiffs allege that the prospectus and registration statement are materially false and misleading on the grounds that the documents (1) failed to disclose that Deutsche Telekom was engaged in advanced acquisition talks with VoiceStream Wireless Corp. at the time the documents were prepared, and (2) overstated Deutsche Telekom's real estate portfolio by at least 2 billion Euros (approximately $1.8 billion). (Compl. ¶¶ 2, 27-29, 34-42.)

In July 2000, as news of Deutsche Telekom's planned purchase of VoiceStream began to emerge, the value of Deutsche Telekom stock declined. (Compl. ¶¶ 30-31.) On or about July 24, 2000, Deutsche Telekom publicly announced its planned takeover of VoiceStream. The price of Deutsche Telekom declined further — to approximately $45 per share — on the heels of this announcement. (Compl. ¶ 32.) Pursuant to an agreement, Deutsche Telekom would pay $200 per share of VoiceStream to purchase VoiceStream and would issue additional shares of Deutsche Telekom to fund that purchase. (Compl. ¶¶ 29, 33(e).) This $200 per share figure was offered by Deutsche Telekom to VoiceStream on June 15, 2000. (Compl. ¶ 33(e).) In response to the offer, VoiceStream agreed to begin providing Deutsche Telekom with due diligence information as of June 15, 2000. (Id.)

Deutsche Telekom stock declined again in February 2001, after the company disclosed that it was taking a special writedown for land values in its real estate portfolio by 2 billion Euros (approximately $1.8 billion) from a total book value of 17.2 billion Euros. (Compl. ¶ 42.) Plaintiffs allege that the over-valuation of Deutsche Telekom's real estate portfolio had come to light within the company as early as 1995. (Compl. ¶ 44.)

II. DISCUSSION

Allan Kramer and Bruce Holberg seek to be appointed class representatives and seek certification of the following class:

[A]ll persons who purchased ordinary shares of stock in the form of American Depository Shares (`ADS') of Deutsche Telekom AG (`Deutsche Telekom' or the `Company') during the period from June 19, 2000 to and including February 21, 2001 (the `Class Period'). Excluded from the Class are the defendants and the underwriters of the offering and all officers, affiliates and immediate family members of such entities, including their heirs, legal representatives, successors, predecessors in interest and assigns. (Plaintiffs' Memorandum of Law dated April 22, 2002.)

To succeed on this class certification motion, plaintiffs must establish that they meet the four prerequisites of a class action set forth in Fed.R.Civ.P. 23(a) and that the class action ...


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