Speaking of becoming a part of someone else . . . .
Sources: DT, VoicesStream Deal Set
By Jessica Hall Jul 23 7:21pm ET
NEW YORK (Reuters) - Deutsche Telekom AG (DTEGn.DE) is set to unveil a $50.7 billion cash-and-stock acquisition of money-losing wireless telephone company VoiceStream Wireless Corp., a move which would give the German telephone giant a crucial foothold in the United States, sources familiar with the situation said on Sunday.
VoiceStream(VSTR.O) and Deutsche Telekom declined to comment. A formal merger announcement is expected late Sunday night or Monday morning before the European financial markets open, sources said.
Under the agreement, Deutsche Telekom will pay 3.2 shares, plus $30 in cash, for each VoiceStream share. The deal values VoiceStream at about $195 a share, or $16,900 per wireless subscriber. The German company also will assume $5 billion in VoiceStream debt, sources said.
Investors holding more than 50 percent of VoiceStream agreed to back the deal, said one source who declined to be named.
Deutsche Telekom will provide VoiceStream with an initial $5 billion cash infusion that will allow it to bid for additional telephone licenses in the upcoming auctions of U.S. wireless spectrum, sources said. In exchange, Deutsche Telekom will receive convertible preferred stock, sources said.
``That could be used as a warchest to participate in auctions -- if and when they happen -- and to aggressively build-out their network and to be opportunistic with spectrum acquisitions,'' said ABN AMRO analyst Kevin Roe.
VoiceStream may seek to fill in gaps in its network in areas such as in California, Nevada and the southeastern U.S., Roe said.
John Stanton, VoiceStream's chairman and chief executive officer, will remain with the combined company and oversee Deutsche Telekom's new U.S. wireless operations, sources said.
VoiceStream, one of the last independent U.S. wireless companies, has three million customers and a nearly national network. It uses a technology similar to the GSM European mobile telephone standard, which would easily mesh with Deutsche Telekom's other wireless operations.
Shares of Deutsche Telekom fell last week on fears that it would overpay for VoiceStream, traders said.
``If the (offer) numbers are correct, it is an ungodly huge sum of money for assets that probably aren't worth that much,'' said one trader who specializes in takeover stocks.
Even though the price-tag is high, some analysts see VoiceStream as a more attractive takeover target than other national wireless companies such as Nextel Communications Inc. or Sprint PCS.
``There is no other (U.S.) asset remaining that can compete with VoiceStream. It's the only near-national GSM operator. It's the most valuable asset to a European telco,'' Roe said.
Deutsche Telekom has made no secret of its desire to enter the U.S. telecommunications market, the world's largest. While the company has a war chest of 100 billion euros ($92 billion) to finance its assault, but it may be thwarted in its expansion drive by U.S. regulators.
The VoiceStream deal is expected to face intense scrutiny in Congress, where many legislators have expressed concern about the 59-percent stake the German government holds in Deutsche Telekom. The deal is expected to reduce the German government's stake to 45 percent due to the number of shares Deutsche Telekom will issue to pay for VoiceStream, sources said.
A U.S. law prohibits the acquisition of a U.S. telephone company by any firm that is more than 25-percent owned by a foreign government. But the law gives regulators discretion to waive that limitation if a deal is deemed to be in the public interest.
The European Commission said on Sunday a draft U.S. bill threatening to stop Europe's former state monopoly telecoms groups from acquiring U.S. telecoms firms would have global trade implications if adopted.
``They're going to have a really hard time getting regulatory approval for this. There's a tremendous amount of risk,'' the trader said.
Deutsche Telekom also has held recent talks to acquire long-distance telephone company Qwest Communications International Inc., but it has given up hope, however, Sprint Corp. due to fears of regulatory resistance, sources said. |
