Will VoiceStream accept Deutsche Telekom's bid or encourage a bidding war with NTT DoCoMo?
NEW YORK. Deutsche Telekom AG has made a bid for VoiceStream Wireless Corp. that values the U.S. company at about $205.60 a share in stock and cash, or about $53 billion, according to people familiar with the matter.
The German telecommunications giant's latest bid is "on the table," and the two sides continue serious discussions about a potential deal, according to a person familiar with the matter. It remains to be seen, however, whether VoiceStream will accept Deutsche Telekom's bid or encourage a bidding war with NTT DoCoMo, the publicly traded wireless unit of Japan's Nippon Telegraph & Telephone Corp. and a potential rival suitor.
'On the Table' Reporter Nikhil Deogun discusses Deutsche Telekom's offer for VoiceStream. Under terms of the bid being discussed, Deutsche Telekom has offered a fixed exchange ratio of 3.2 shares of its stock plus $30 a share in cash for each VoiceStream share. The deal offer doesn't include a "collar" that would adjust the ratio for fluctuations in Deutsche Telekom's stock price.
The Deutsche Telekom supervisory board met Wednesday, but no decision was made on an acquisition of VoiceStream. However, the board could meet again over the weekend to discuss a potential deal. Deutsche Telekom's American depositary shares were trading at $54.875, down 87.5 cents, in 4 p.m. New York Stock Exchange composite trading, which would value VoiceStream at $205.60 a share. VoiceStream rose 93.75 cents to $145.50 in 4 p.m. Nasdaq Stock Market trading, but shot up to $169.6875 in after-hours trading. VoiceStream declined to comment. A spokesman for Deutsche Telekom declined to comment. The bid, which has been tweaked in the past week, comes amid some opposition on Capitol Hill to the idea of a company that is majority-owned by a foreign government buying a U.S. telecommunications company. Deutsche Telekom is 59%-owned by the German government, and some members of Congress have noted that U.S. law bars the transfer of Federal Communications Commission licenses to companies that are more than 25%-owned by a foreign government, though in the past that rule has been waived for some small deals. In recent weeks, Democratic Sen. Ernest F. Hollings of South Carolina sent a letter to William Kennard, chairman of the FCC, urging him to put an end to any speculation that the purchase of an American company by a foreign-government-owned entity would be approved by U.S. regulators. "It's unthinkable," he wrote, "under present law that BellSouth is forbidden from buying AT&T, but Deutsche Telekom, a monopoly owned by the German government with one-third of their employees enjoying permanent employ, can buy AT&T. We did not deregulate U.S. telecommunications to permit the regulated foreign-government-owned telecommunications companies to take over the U.S. market."
NTT DoCoMo Again Considers Bidding for VoiceStream Wireless (July 14) Deutsche Telekom, VoiceStream Deal Could Bridge Wireless Standards (July 12) Sen. Hollings also introduced legislation that would forbid the FCC from waiving U.S. ownership restrictions for companies that are more than 25% foreign-government-owned, even if that government is a member of the World Trade Organization. Sen. Hollings said that Deutsche Telekom "operates from a protected home market," as do the French and Japanese telephone firms, and said these firms would have an unfair advantage in the U.S.
VoiceStream has had discussions with several potential partners in the past few months. Japan's DoCoMo has looked at VoiceStream for months and is more interested in taking an equity stake in the wireless carrier. But people familiar with the matter say DoCoMo is willing to buy the company outright and may submit a bid soon. Much depends on whether VoiceStream's board and management want to take on a strategic partner or sell the company outright. The interest in VoiceStream, Bellevue, Wash., stems from the fact that it is one of the only independent national wireless carriers left in the U.S. Many foreign firms that want access to the U.S. telecommunications market are turning to wireless first as a way to get a foothold here. That is because wireless is a quicker way to offer service in local markets. Wireless firms don't have to go through the same regulatory hurdles as wireline companies, which are strictly regulated by states and must have rates and tariffs approved by state regulatory bodies.
The negotiations with Deutsche Telekom are progressing well, and if VoiceStream agrees to be sold, it could strike a deal within a week, according to people familiar with the matter. Deutsche's overtures come as the German telecommunications company is weighing a number of options, including a possible bid for Qwest Communications International Inc. or Sprint Corp., to establish a beachhead in the U.S. Should Deutsche, which has a big war chest for acquisitions, pull off a deal with VoiceStream, it might not feel the need to buy Sprint, whose wireless business is considered the major attraction for acquirers. Write to Nikhil Deogun at firstname.lastname@example.org, Deborah Solomon at email@example.com and Nicole Harris at firstname.lastname@example.org
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