World

Deutsche Telekom To Buy VoiceStream

By CBSNews.com staff CBSNews.com staff

July 24, 2000 / 8:11 AM EDT / CBS

Europe's biggest telecom company, Deutsche Telekom AG, said Monday it will pay $50.7 billion for VoiceStream Wireless Corp.

Deutsche Telekom will offer 3.2 of its shares plus $30 in cash for each share of Bellevue, Wash.-based VoiceStream. That totals roughly $195.75 per share, well above VoiceStream's Friday closing price of $150. The boards of both companies approved the deal Sunday.

It gives Deutsche Telekom, which is majority owned by the German government, an international reach to 375 million customers. It also gives the company its first toehold in the United States with the only U.S. telecom company using global system for mobile communications, or GSM, the most popular digital cellular standard outside the United States.

"VoiceStream has licenses in nearly every state in the United States, and it has the fastest growth rate among American mobile carriers," said spokesman Ulrich Lissek of Deutsche Telekom, which also uses GSM technology.

The fusion is also expected to meet heavy opposition from U.S. lawmakers and regulators who have expressed concern about a U.S. takeover by Bonn-based Deutsche Telekom.

Deutsche Telekom's Stephan Broszio told CBS Radio News the plan is to expand Voicestream, which now has almost two million American cellphone customers, and combine American know-how with European expertise.

"We want to profit from the U.S. experience and together that should be a great company," he said. "Voicestream is an American company, a strong American company, and it will stay a strong American company."

CBS News Correspondent Dan Raviv reports 29 senators have urged the Federal Communications Commission to consider national security implications of any foreign acquisition of a U.S. telecommunications firm.

Federal Communications Commission Chairman William Kennard pledged last week in a letter to the senators that he would give "close scrutiny" to any such takeover attempt.

Deutsche Telekom hopes to soothe the concerns by the fact that the VoiceStream deal would reduce the German government's stake in the company from 58 percent to 45 percent.

Deutsche Telekom will pay for the deal by issuing 828.8 million new shares and will also assume $5 billion in debt from VoiceStream.

Separately, Deutsche Telekom will invest $5 billion in cash in VoiceStream, which could use the money to bid later this year for U.S. frequencies in the next generation of wireless-phone networks.

VoiceStream, spun off from Western Wireless Corp. last year, employs 8,200 workers. It completed two acquisitions of its own earlier this year: Aerial Communications Inc. for $5.6 billion and Omnipoint for $7.2 billion.

VoiceStream is one of the nation's last independent nationwide wireless carriers. It has about 2.3 million wireless subscribers and owns wireless phone operating licenses nationwide, including in Hawaii.

Deutsche Telekom, which has about 25 million European mobile pone subscribers, last year reported profits of $1.21 billion on revenues of $33.14 billion in Internet, standard telephone and wireless services.

Eager to penetrate the U.S. market as it seeks to expand globally, Deutsche Telekom also had reportedly been weighing overtures to Denver-based Qwest Communications International Inc. and the wireless unit of Sprint Corp.