Cebit Technology Fair 2000 Will Focus on Financing as Much as Technology
By Sonja Heizmann (Bloomberg)
Cebit Technology Fair to Focus as Much on Dollars as Dot-Coms
Hanover, Germany, Feb. 21 (Bloomberg) -- Technology will share
the spotlight with finance later this week at the Cebit Technology
Fair, the world's largest exhibition of computer, communications and
Internet equipment and services.
The reason, executives and analysts said, is simple. The rush
to build Internet market share and brand names is driving billions
of dollars in mergers in Europe. The cheapest way to finance these
takeovers is by swapping stock; that's why companies are racing to
sell shares in themselves or their Internet divisions.
Companies around Europe learned a lesson from Telefonica SA of
Spain, which last year sold one-third of its Internet unit, Terra
Networks SA, for 13 euros a share. Since then, the stock has risen
to 131.7 euros a share, valuing Terra at 36.9 billion euros ($36.4
billion), most of which Telefonica can use to buy other companies.
''Companies have to lay claim for coming years now, otherwise
they will be left empty-handed,'' said Josef Scarfone, who helps
manage $15 billion at Frankfurt Trust. ''Companies have gotten so
big that shares are the only currency that can be used to pay for
these transactions.''
Executives are eager to establish themselves because Europe is
expected to experience an Internet frenzy not unlike what the U.S.
saw last year. The number of online users in Europe is expected to
more than triple to 121 million by 2004 from 34.7 million in 1998,
according to Merrill Lynch & Co. Internet commerce will balloon to
1.6 trillion euros from 36 billion euros in the same period.
The hunt for prey intensified after America Online Inc., the
largest Internet provider, with more than 20 million customers,
agreed on Jan. 10 to buy Time Warner Inc., the No. 1 media company,
for a $178 billion in stock and assumed debt.
Born to Merge
Analysts expect that to spur other telecommunications, Internet
and traditional media companies to act. Media companies are looking
for a broader audience while Internet companies need news, shopping
and financial data to fill web pages, and phone companies are hoping
to increase their network usage.
''AOL and Time Warner were the starting gun for a consolidation
in the market,'' Scarfone said.
To pay for these transactions, major Internet service providers
and phone companies are creating stock in themselves.
Lycos Inc., one of the most popular Internet search services,
and Bertelsmann AG, Germany's biggest media company, plan to sell up
to 20 percent of their European joint venture in a public share sale
on Germany's Neuer Markt in the first half of this year. AOL Europe,
the European online joint venture of Bertelsmann and America Online
Inc., is also mulling a listing.
As phone companies such as Deutsche Telekom AG and Swisscom AG
struggle with falling margins in their traditional businesses, they
seek growth in the Internet and flock to the stock market.
Teeing Up T-Online
Telekom, Europe's biggest Internet service provider, plans to
sell shares in its online unit, T-Online International AG, which is
worth an estimated 20 billion and 30 billion euros, in April. Ahead
of the IPO, it has already started to beef up the unit by entering
alliances and making acquisitions, and it has pledged to build an
international online presence.
A day after its Club Internet purchase, Telekom said it will
take a 25 percent stake in Commerzbank AG's Comdirect Bank, Europe's
biggest online broker, in exchange for a corresponding stake in its
Internet unit.
Telekom Chief Executive Ron Sommer ''saw what happened in
telecommunications when he was left with empty hands after bidding
for Telecom Italia,'' Scarfone said. In May, Telekom lost out to
Olivetti SpA in a battle for Italy's biggest phone company. ''This
time he doesn't want to miss out.''
Swisscom also is exploring whether to have separately traded
shares in Blue Window, its Internet service provider.
MobilCom sold shares in its Freenet.de AG Internet unit in
December, raising more than $100 million for expansion. Freenet.de's
shares, which sold for 29 euros in the IPO, recently traded at 249.
Broadband In Hand
Telecommunications companies will benefit from the exploding
online market as new applications, such as Wireless Application
Protocol or WAP, which let cellular users get traffic information or
theater tickets on the go, will increase traffic in their networks.
To tap Europe's growing mobile Internet market, Telekom will
form a joint venture of its cellular-phone and Internet units. The
venture will be named at the Cebit. Telekom sees the European mobile
web-surfing market doubling annually, to as much as 30 billion euros
by 2003.
Internet and phone companies are not the only contenders for a
stake in the booming market online market: International banks and
venture-capital companies are also in the run.
Chase Manhattan Corp., the second-largest U.S. banking company,
said last month it would team up with Episode-1 Partners to open a
$100 million fund to invest in European start-up companies.
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