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To: Luc N. who wrote (11046)	4/30/1999 3:35:00 PM
From: pat mudge	Read Replies (2) \| Respond to of 18016

What journalists write about on Fridays: Telecommunications April 30, 1999 13:08 D.Telekom shopping spree seen, if merger fails By Neal Boudette European Telecommunications Correspondent FRANKFURT, April 30 (Reuters) - Deutsche Telekom AG is likely to buy somebody else, and quickly, if its controversial merger with Telecom Italia SpA goes up in smoke, analysts said on Friday. "I think they would try to fill gaps in Spain, France and the U.K.," said ABN Amro's Andrew Moffat. "They clearly have an aggressive oulook on acquisitions." So far the $81 billion merger, potentially the largest ever, has failed to rally firm political and shareholder support. If it collapses, Telecom Italia would have to find another way of fending off a $65 billion hostile takeover bid by Olivetti SpA . Deutsche Telekom would be better off, but not by much. Before dialing up its Italian connection, the company had built its international position around a close alliance with now-jilted France Telecom SA . If the merger fails, the German-French relationship may be too damaged to allow coordination of international activities. In that case, Deutsche Telekom "will have left themselves high and dry," said Denis Gross at Williams de Broe. While a failed marriage would alter the German giant's global position, it probably wouldn't dampen Chief Executive Ron Sommer's thirst for acquisitions, analysts said. Even before the Telecom Italia merger was announced, Sommer unveiled plans to raise capital to finance a buying spree, with the aim of getting into the key British and U.S. markets. On Wednesday Deutsche Telekom will outline a capital increase of about 10 percent, which could place 280 million new shares in the market and raise some 20 billion marks. "They've got resources to buy up companies without Telecom Italia," said Eric Owen at International Data Corp. Moffat, who is bullish on the merger despite doubts by some Telecom Italia shareholders, expects a move in Britain. Cable & Wireless Plc has long been seen as a possible target of Deutsche Telekom. More recently, mobile carrier One2One, a joint venture of C&W and U.S.-based MediaOne Group Inc , has emerged as another possibility. "I think a U.K. acquisition could happen in the next two months regardless if the merger goes ahead," Moffat said. In the U.S., the obvious target is Sprint Corp , in which Deutsche Telekom and France Telecom each own 10 percent stakes. While announcing the Telecom Italia merger, Sommer said he wanted to "enhance" the Sprint investment. But increasing the Sprint stake could be complicated because France Telecom and Deutsche Telekom have an agreement preventing either from making a hostile bid for Sprint. "If there is no merger with Telecom Italia, I don't think they could do it without France Telecom going along," Owen said. The merger has slipped into doubt this week with the German and Italian governments deadlocked on the deal. Italy objects because Germany owns 72 percent of Deutsche Telekom and would end up with 40 percent of a group that would include its former national phone company. Investors have also hesitated. The merger is supposed to value Telecom Italia at 12.03 euros per share in stock. But analysts believe it is closer to 11 euros, which is below the 11.50 euros Olivetti is offering in cash, bonds and stock. On Friday, the chairman of Italian insurer Generali, which owns 1.56 percent of Telecom Italia, said he thought Olivetti could still prevail >>>>