Monday July 3, 5:40 am Eastern Time
UPDATE1-D.Telekom/Sprint said in talks, U.S.
hurdles await
(UPDATE: Adds Telekom declining comment, share price)
FRANKFURT, July 3 (Reuters) - Deutsche Telekom AG was on Monday reported to have held preliminary merger talks with U.S. telecoms operator Sprint Corp. (NYSE:FON - news), but any deal looks certain to face stiff opposition from the U.S. Senate.
The reports follow last week's U.S. and European regulatory opposition to a $120 billion bid by U.S. WorldCom Inc.
(NasdaqNM:WCOM - news) for Sprint. Watchdogs said any tie-up would violate Internet and long-distance anti-trust
rules.
Britain's Financial Times newspaper, citing ``one person close to the discussions'', reported in its Monday edition that Telekom had held informal talks with Sprint.
A Telekom spokesman, however, declined comment on the media reports, saying: ``We don't take part in speculation
about our company.''
By 0900 GMT, Telekom shares were 0.75 percent higher at 60.25 euros. The blue-chip DAX index was 0.39 percent
firmer.
Telekom is openly seeking U.S. expansion and is widely expected to take a close look at Sprint.
But the Wall Street Journal reported on Monday that U.S. Senate leaders have signalled opposition to a possible takeover as being in violation of U.S. law and a potential threat to competition and national security.
The Journal cited a letter by senators to Federal Communications Commission (FCC) Chairman William Kennard, noting that U.S. law bars transfer of FCC licenses to companies that are more than 25 percent owned by a foreign government. The German government retains a majority stake in Telekom.
Germany's Welt am Sonntag newspaper reported at the weekend that Telekom and Sprint were discussing a share swap similar to the merger that created automotive giant DaimlerChrysler AG and that Telekom could pay about 240 billion marks ($117.5 billion) for the U.S. group.
The former German telecoms monopoly owns 10 percent of Sprint, as does France Telecom -- a legacy of their defunct
three-way alliance in the GlobalOne corporate communications network, now controlled by France Telecom.
TELEKOM ARMED FOR ACQUISITIONS
Bonn-based Telekom, which still derives the vast bulk of its revenues from domestic operations, has amassed a large
acquisitions warchest.
Last month, it won shareholder backing to issue up to 1.5 billion new shares within the coming five years, furnishing it with some 90 billion euros ($86.21 billion) in acquisition currency at current values.
Telekom also has cash from a $14.5 billion record-breaking corporate bond issued last week.
Telekom Chief Executive Ron Sommer has said he eventually wants his group to be as big in the United States, the world's largest telecoms market, as it is now in Europe.
But analysts say Sommer is unlikely to rush into a deal because he will want to avoid a takeover fiasco following
abandoned bid talks with U.S. carrier Qwest (NYSE:Q - news) in March and an aborted merger with Telecom Italia last
year.
Sommer confirmed in an interview in Germany's Bild am Sonntag newspaper on Sunday that the group was looking for a
firm acquisition in the United States.
``The U.S. market is the next focus. We're thinking clearly of a takeover there and not a loose alliance,'' he said. But he added: ``The group must fit us and the price must be right.'' |
