Industry news:
March 7, 1999
Dow Jones Newswires
Deutsche Telekom:No Interest In TV Ops Sale To Deutsche Bk
Dow Jones Newswires
FRANKFURT -- Deutsche Telekom AG (DT) said Sunday it may no longer consider Deutsche Bank AG (G.DBK) as an investor in its cable television business after conflict between the two parties reached a climax late last week.
The spokesman for Deutsche Telekom confirmed that the company had sent a letter to Deutsche Bank, but wouldn't detail its contents. He said, however, "It appears that Deutsche Bank has attempted to exert price pressure via Brussels, and under these circumstances we would no longer be prepared" to consider a sale.
A report in German news weekly Der Spiegel on Sunday highlighted the dispute.
Deutsche Bank officials couldn't be reached for comment.
The conflict boiled over Thursday after the bank approached E.U. competition authorities and accused the telecommunications giant of using time-wasting tactics to block its attempt to mediate in the privatization of the cable TV business, the news weekly said.
"We don't view this as good style," Telekom said.
Spiegel reported that Telekom flatly rejected the bank's offer of a complete buyout of the business for a price between DEM5 billion and DEM9 billion, stymieing potential talks between the two parties.
Deutsche Bank's offer is significantly lower than Telekom's DEM20 billion valuation reported recently.
The Spiegel report said Telekom is also considering reducing its business ties with Deutsche Bank, which would mean a significant loss for the bank. The spokesman wouldn't comment.
The bank is reportedly interested in the investment returns from buying and repackaging Telekom's cable network, while ranking high as a potential book-runner for a DEM15 billion capital increase being considered for this year by the largely state-owned telecom company.
Ties between the companies have been close since Deutsche Bank acted as one of the lead book-runners for Telekom's DEM20 billion initial public offering in 1996.
Spiegel said Deutsche Bank claimed its actions had been misunderstood, and that it is only interested in acting as a "facilitator" in the privatization of the cable business for an interim three to four years.
The bank's move irritated senior Telekom executives, however. "We won't allow ourselves to be put under time pressure, by anyone," said Telekom board member Gerd Tenzer to Spiegel.
Instead of a complete sell-off, Telekom will continue with its original strategy of founding at least ten regional cable television associations, for whom it will then find strategic investors such as media or telecoms companies. In some it will maintain a 20% stake, while others will be sold off completely.
A roadshow to advertise the sale of the business starting in March will be taken to Berlin, Duesseldorf, Munich, London and New York, with the first talks set to begin in April, said Tenzer, who heads the cable TV operations.
In January, Telekom spun off its cable TV business into two new subsidiaries in a move to attract investors. Kabel Deutschland GmbH is responsible for expanding the extensive network, which serves almost 18 million German households. MediaServices GmbH is developing broad-band cable and digital TV.
Many companies including Microsoft Corp. (MSFT) are reportedly interested in Telekom's cable network, which serves almost 18 million German households.
-By Angela Cullen;
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