Deutsche Telekom needs to spin off assets..........................
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Telekom to Spin Off Cable Assets Next Year After EC Pressure
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Despite its protests to the contrary, Deutsche Telekom's move to spin-off its cable business into an independent company early next year caught virtually nobody by surprise.
The powerful German PTT has always taken the stance that it would not bow to European Commission (EC) pressure by selling off any of its cable network, believing that such a move would cripple Germany's media infrastructure and delay the rollout of new media services.
However, the EC's German competition commissioner Karel Van Miert made no secret of his desire to take away some of the power that Europe's dominant telecom operators which also own cable TV systems (such as Telekom) will have when telecom markets are liberalised after Jan. 1, 1998.
As we correctly predicted about 10 months ago, a compromise in which Telekom would retain control over a weakened cable division always seemed to be in the offing (EMB&F, Feb. 10, 1997). Telekom officials said that they have not decided whether to float the cable subsidiary on the stock exchange.
Last week's announcement showed that Telekom was ready to comply with the EC, before the EC forced the issue.
Early next year, Telekom are expected to split the cable division into regional companies that is expected to take on shareholders. This could mean that Germany's smaller regional cable operators could soon own a piece of their fiercest rival.
Telekom officials acknowledged that they are exploring an option of selling shares to strategic investors, which could include some of the smaller operators - which serve a combined 10 million homes.
Other potential investors that have been mentioned include Microsoft - which already has invested $1 billion in broadband cable and reportedly is looking to invest more - and German banks. Some reports put the worth of Telekom's cable business at close to Pounds 7 billion.
Last week's announcement was expected, and it carried few surprises. Telekom still will retain control over much of the new group - having agreed to give away shares rather than selling its system in total. The most likely scenario will see the Munich-based T-Media Net become the central point for Telekom's cable activities. The PTT also runs T-Mobile and T-Online.
The problem regulators will face deals with ensuring that Telekom upgrades its cable network sufficiently. Telekom would be more than happy to continue using the telephone as a response channel. Regulators also would try to make certain that Telekom does not inhibit the independent company from providing telephony services.
Under the plan, Telekom still would control the interconnection, leaving its competitors to have to go through Telekom anyway in order to get their services to the consumer. This has caused some of Telekom's detractors to call for the PTT to give up control of the entire cable spin-off.
Telekom's announcement beat the publication of a EC report aimed at Telekom (officially on the links between cable TV and telephony systems). The report is not expected to treat Telekom's situation kindly. |
