US Congress Weighs Blocking Deutsche Telekom Acquisition of American Telecom Company

Strategic Insights -

The US Congress is considering a proposal that would block Deutsche Telekom, a German telecommunications company partially owned by the German government, from acquiring VoiceStream Wireless Corporation, an American company. The proposal is driven by concerns about potential unfair competition and government subsidies. However, experts argue that Deutsche Telekom has undergone significant deregulation and privatization in the past few years, and its majority owner's stake is diminishing.

Key Takeaways:

  • Deutsche Telekom, once a dominant player in Germany's telecommunications market, has faced intense competition from domestic and foreign rivals, including Vodafone AirTouch, France Telecom, and American companies like BellSouth and WorldCom.
  • The German government has been selling off shares in Telekom, aiming to reduce its stake to near zero, and has deregulated the country's communications market, leading to significant changes in the company's business model.
  • Despite some initial concerns about Deutsche Telekom's business practices, German regulators have largely supported its rivals on key pricing issues, and the company has sold majority stakes in its cable systems to American companies, including Callahan Associates International.
  • The EU has warned that a Congressional effort to block the Deutsche Telekom-VoiceStream deal would violate the WTO's 1997 agreement to open telecommunications markets to private and publicly owned companies.
  • Deutsche Telekom's executives argue that the government's stake in the company would be diluted to 45% following the acquisition, reducing concerns about potential government interference.

Statistics:

  • Deutsche Telekom has sold nearly $30 billion worth of shares in three separate offerings over the past four years.
  • The company's revenues for wired telephone service declined by 30% in 2001 due to price cuts and customer churn.
  • Deutsche Telekom's mobile telephone business has seen significant growth, with revenues compensating for the shortfall in wired services.
  • The EU's European Commissioner has demanded that Deutsche Telekom sell off its nationwide cable television network, breaking it up into nine regions.
  • Callahan Associates International plans to invest over $5 billion in Deutsche Telekom's cable systems to upgrade them for telephone and high-speed internet services.
  • Deutsche Telekom's acquisition of VoiceStream is valued at $50.7 billion in stock and cash.

Sources:

  • [The New York Times, "US Congress Weighs Blocking Deutsche Telekom Acquisition of American Telecom Company"]
  • [Testimony of Wilfried Schneider, EU Representative]
  • [Deutsche Telekom Annual Report, 2001]
  • [EU European Commissioner's statement on Deutsche Telekom's cable television network]