Deutsche Telekom Should Buy Global Crossing, C&W, Analysts Say
By Andrew Bulkeley
Deutsche Telekom Should Buy Global Crossing, C&W, Analysts Say
Bonn, March 3 (Bloomberg) -- Deutsche Telekom AG should
pursue Global Crossing Ltd. or Cable & Wireless Plc to gain access
to the U.S., not Qwest Communications International Inc. and U S
West Inc., analysts and investors say.
Europe's largest phone company made separate bids worth more
than $80 billion for Qwest and U S West, USA Today reported this
week. But the former German monopoly would do better to seek other
ways into the largest telecommunications market, analysts said.
``Global Crossing would be the better choice,' said Josef
Scarfone, who includes Telekom shares among the $15 billion he
helps manage at Frankfurt Trust. ``The deals are coming and they
will happen in the next weeks, not months.'
Telekom needs new markets to offset growing competition at
home, where more than 80 smaller rivals have snatched a third of
its long-distance business and crimped prices. Telekom also must
beef up to compete with rivals who are building global networks to
serve the fast-growing Internet and business-data markets.
The company -- which has $14 billion in cash and later this
year will issue separate shares in its online services business,
Europe's largest, and mobile-phone unit -- has talked to Global
Crossing about a merger, a person familiar with the talks told
Bloomberg News.
Telekom already uses Global Crossing's worldwide network.
``I believe that a global network is the way to go, and
that's what Global Crossing already is,' said Peter Treadway, an
analyst at Ryan, Beck & Co. in Livingston, New Jersey. ``Then you
need to load customers onto that network, and there they are in
the third-largest economy in the world -- Germany.'
Too Expensive?
A merger with Denver-based Qwest would give Telekom a U.S.
network, advanced data and Internet services and a local carrier,
Denver-based U S West, which owns wires into homes in 14 states.
Those cables can be upgraded to provide video and fast Internet
access.
Still, analysts said they're concerned Telekom would have to
pay too much for U S West, which was recently acquired by Qwest.
Telekom also might inherit regulatory headaches common with local
U.S. carriers.
``Qwest isn't a candidate that I'd put at the top of the
list,' said Stephan Droxner, an analyst with Landesbank Baden-
Wuerttemberg in Stuttgart, Germany, who has a ``market perform'
rating on the shares.
Cable & Wireless Plc, the U.K.'s second-largest traditional
phone company and one of the largest carriers of U.S. Internet
traffic, is also often tipped as a likely Telekom partner.
``Every foreign acquisition is welcome,' said Theo Kitz, an
analyst with Merck Fink in Munich. ``They've got very little
outside Germany.'
British Telecom Plc, the U.K.'s largest phone company, is
also a potential target, though Kitz said it would be awkward
because Telekom would then have to sell One 2 One Ltd., the U.K.
cellular phone company it bought last year.
Telekom shares rose as much as 4.9 percent, or 4.82 euros, to
104.2. In the last six months, the shares have risen 147 percent,
making them the fifth-best performer in the Dow Jones Europe Stoxx
50 index. |
