US senators indicate opposition to
D.Telekom-Sprint
Monday July 3, 4:36 pm Eastern Time
(UPDATE: Adds FCC, industry source comments, closing stock prices)
By Jeremy Pelofsky
WASHINGTON, July 3 (Reuters) - A bipartisan group of U.S. senators indicated they opposed Deutsche Telekom AG acquiring Sprint Corp. (NYSE:FON - news), in light of a law that prohibits foreign companies that are partially government-owned from buying American companies.
Thirty senators, including Senate Majority Leader Trent Lott and Minority Leader Thomas Daschle, urged federal regulators to closely examine any proposed merger that may result from reported informal talks between the two companies.
``As the U.S. law provides, we oppose the transfer of licenses to companies who are more than 25 percent foreign
government-owned,'' the senators said in a June 29 letter sent to Federal Communications Commission Chairman William
Kennard.
A spokeswoman for the FCC said in response that the agency ``will carefully scrutinise any transaction that comes our
way.''
Deutsche Telekom, which already holds a 10 percent stake in Sprint, is 66 percent-owned by the German government.
The German telecommunications giant and Sprint were reported on Monday to have held preliminary merger talks following opposition from the United States and Europe last week to a planned $120 billion bid by WorldCom Inc. (NasdaqNM:WCOM - news) for Sprint.
The proposed acquisition by the No. 2 U.S. long-distance carrier WorldCom of the No. 3 U.S. company Sprint ground to
a halt after the companies were unable to reach a compromise with U.S. antitrust regulators and the European Commission
voted against the merger plan.
Spokesmen for both Sprint and Deutsche Telekom declined to comment on the informal talks reported in Britain's Financial Times.
An industry source said that while the two sides were in contact, speculation the two sides have held preliminary merger talks was ``wildly overdone.''
In light of the recently reported talks, the U.S. lawmakers told Kennard that an acquisition by a government-owned
telecommunications firm would be inconsistent with U.S. policy to promote competition and maintain a secure
communications system for U.S. national security.
``To allow a foreign government owned corporation to purchase a U.S. telecommunications company would be putting
domestic competitors at the mercy of a foreign government,'' the senators said in the letter.
The lawmakers cited similar instances in which Italy, Spain and Hong Kong have stopped transactions involving an
acquisition by a government owned foreign company.
``U.S. regulators should be similarly sceptical of such acquisitions in this country,'' they said.
Sen. Ernest Hollings, a South Carolina Democrat, introduced legislation last week that is designed to prohibit any
exceptions to the rule that limits the transfer of licenses to companies that are more than 25 percent government-owned.
Hollings said last week that the law allowed the FCC to waive the prohibition if the transaction would be in the public interest.
``Unfortunately the FCC in previously rulemaking has found that the public interest is satisfied solely on the basis of whether the foreign government-owned company is based in a World Trade Organisation country,'' Hollings said.
The FCC's Kennard said last week he was aware of Hollings' proposed legislation and his concerns.
Shares of Kansas City, Mo.-based Sprint closed up 3-5/16 to 54-5/16 on the New York Stock Exchange based on the
acquisition speculation, while American Depositary Receipts for Deutsche Telekom closed off 15/16 to 55-13/16 during a
pre-holiday shortened trading session on the NYSE. |
