German firm says Italia merger doesn't
exclude cooperation with French
partner
May 5, 1999: 8:55 a.m. ET
LONDON (CNNfn) - As the head of Deutsche
Telekom was trying to repair the growing rift with its
French partner over the proposed merger with
Telecom Italia, Rome once again threatened to scuttle
the deal.
Ron Sommer, chief executive of the German
telecommunications carrier, held out an olive branch to
France Telecom Wednesday, when he said that any
enlarged group resulting from the merger with Telecom
Italia still could participate in Telekom's current Global
One joint venture with the Paris-based carrier and
Sprint Corp. of the U.S.
"We stand behind Global One. A merged company
could contribute more to Global One than Deutsche
Telekom or Telecom Italia alone," Sommer said at a
press conference in Bonn, Reuters reports.
France Telecom President Michel Bon lashed out
at his German partner last week, calling the proposed
merger "a flagrant breach of a pan-European
cooperation pact" that Telekom and its French partner
signed last December.
Bon said he plans to sue his German partner if it
proceeds with the merger. Sommer, however, rejected
this threat and said there is "no basis at all" to seek
damages.
French first choice
Indeed, the German carrier revealed that it had
sought a merger with France Telecom before it turned
to its intended Italian partner. "There were talks with
France Telecom about creating a European carrier,"
Telekom's chief financial officer, Jochim Kroeske, told
Reuters.
In Italy, doubts about the success of the merger
were heightened after communications minister
Salvatore Cardinale reinforced Rome's concerns about
the German state's stake in Deutsche Telekom.
"The government sees the merger as an important
opportunity on condition it does not mean Telecom
(Italia) will be subjugated to Telekom and directed by
the German government," he said.
Cardinale said the government will use its so-called
"golden share" to block any deal if Bonn doesn't
commit to the privatization of Telekom.
Cardinale opposed
He also revealed that he is opposed to the deal. "I
am one of those who do not look favorably on this
joint venture, but the initial conditions of parity and
privatization must be met nonetheless," Reuters
reported Cardinale as saying.
These comments came as the German carrier gave
more details of its planned capital increase, which it
expects to complete by the end of June.
The rights issue is expected raise up to $11 billion
and could see the German government's stake diluted
from the current 72 percent to around 65 percent,
after Bonn said it doesn't plan to take up its allocation.
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