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To: zbyslaw owczarczyk who wrote (10883)	4/19/1999 7:32:00 PM
From: pat mudge	Read Replies (1) \| Respond to of 18016

News from the UK: <<< 20th April 1999 DEUTSCHE TELEKOM TO RAISE HUGE CASH FUND Deutsche Telekom has announced plans for a rights issue which will raise 10.9 billion euros to finance the next phase of the company's global expansion. The Government is still the major shareholder so the issue will dilute the state ownership. The issue in June will be one of the largest such issues ever seen in Europe. With such a war-chest (which could soon be swelled by the sale of Deutsche's cable interests) speculation is mounting about what targets Europe's largest telecoms company may have in its sights. New investment is certain to be overseas because domestic competition has been hitting Deutsche Telekom very hard. Margins have been cut as prices have fallen, costs have been radically reduced and traffic levels have risen, but earnings from domestic operations are down. Cable & Wireless plc has been subject of some speculation and Deutsche Telekom has admitted it is in talks with Telecom Italia to help it stave off Olivetti's take-over bid. Also up for sale at the moment is the UK's One2One cellular network (although Germany's Mannesmann has been eyeing that prospect). Other possible European interests could be expansion in Eastern Europe, where new rounds of liberalisation are coming over the next two years. Some development of the Global One joint venture with France Telecom and Sprint may also be planned. <<<<

To: zbyslaw owczarczyk who wrote (10883)	4/19/1999 10:47:00 PM
From: pat mudge	Respond to of 18016

Latest from Financial Times on DT-TelecomItalia: >>> Europe April 20 1999 Telecoms merger talks stalled By Paul Betts in Milan, William Lewis in New York and Alan Cane in London. Additional reporting by David Owen in Paris, Michael Smith in Brussels and Ralph Atkins in Bonn Serious difficulties emerged last night within Telecom Italia over the company's proposed merger with Deutsche Telekom, forcing the Italian company's board to adjourn a meeting called to approve the deal to create a European telecommunications giant. The main difficulty appeared to be the controlling structure of the merged telecoms group, with the German group wanting a 56 per cent stake. After more than 10 hours, Telecom Italia's board decided to adjourn until today to try to resolve the issues still blocking the deal. Deutsche Telekom's supervisory board gave its management the go-ahead to continue the talks. The two companies also postponed a planned press conference in London scheduled for today . But Telecom Italia claimed the proposed merger was going ahead, that the signals were "positive" and that the companies hoped to hold their press conference tomorrow. The officials claimed the delay in board approval reflected the complexity of the issues. The question of control is central to the success or failure of the ambitious project, especially after the Italian government made it clear yesterday it was insisting on "parity" of ownership between the two groups. It also insisted that Germany firmly commit itself to privatising Deutsche Telekom, which is still 74 per cent state controlled. The Italian government fears any eventual deal risks leading to a German nationalisation of the privatised Italian telecoms company unless the German government sheds control of Deutsche Telekom. After the recent failure to assemble the necessary quorum of shareholders to approve its original defence plan against Olivetti's E60.4bn hostile bid, Telecom Italia is now under pressure to avoid a second flop that would strengthen the chances of its smaller Italian rival. The Deutsche Telekom merger plan is widely seen as an alternative defensive strategy to thwart Olivetti's bid. The proposed deal would change the balance of power in the global telecoms industry. But it faces huge regulatory hurdles and the difficulty of unravelling alliances with other operators. The governments of France, Germany and Italy are awaiting details of the plan, which raises sensitive issues of ownership and control of a strategic industry. Disclosure of the Deutsche Telekom merger proposal came only a few days after Mr FrancoBernabe, Telecom Italia's chief executive, failed to put together the necessary quorum of Telecom Italia shareholders to approve an earlier defence plan. A Deutsche Telekom-Telecom Italia merger would create a sprawling giant with a market capitalisation of almost $180bn (£110bn) and would mark the first acquisition of one national operator by another. Both companies have important alliances and cross-shareholdings with other operators, with one of the most important being the link between Deutsche Telekom and France Telecom. Goldman Sachs is advising Deutsche Telekom. JP Morgan and Credit Suisse First Boston are advising Telecom Italia. >>>>>