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Telekom lines up cable sale
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March 2, 2000: 11:14 a.m. ET
Callahan in talks on new buy as German co. seen preparing bid for Qwest
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LONDON (CNNfn) - Deutsche Telekom, Europe's biggest telephone company, is in exclusive talks with U.S. investment group Callahan Associates International about the sale of a stake in a regional cable communication network in Baden-Wuerttemberg, southern Germany, the company said Thursday.
The announcement comes amid published reports that said Deutsche Telekom had secured the support of the biggest shareholder in Qwest Communications International Inc. for an offer to buy the Denver-based long-distance phone company. The Wall Street Journal said Philip Anschutz, who owns 39 percent of Qwest, was believed to have given his backing for a takeover in meetings with Telekom Chairman Ron Sommer last weekend.
In addition to Qwest, which has a market value of more than $44 billion after the share price rose on reports of the talks, a takeover would imply Deutsche Telekom also acquiring $41 billion-capitalization U.S. West Inc., a local telephone operator that Qwest last year agreed to buy. Such a purchase would give Deutsche Telekom a nationwide U.S. network and the capacity to offer advanced data and Internet services.
Deutsche Telekom's disclosure of talks with Callahan over the Baden-Wuerttemberg cable assets came little more than a week after Callahan agreed to buy a 55 percent stake in another cable-TV network in North Rhine-Westphalia in a deal valued by analysts at between 2.5 billion and 3 billion euros ($2.5 billion to $3 billion).
Deutsche is divesting its nine regional cable networks under pressure from European regulators as part of the deregulation of the region's telecom sector. A Deutsche spokesman told CNNfn.com Thursday the company was aiming to sell about 85 percent of its cable infrastructure by the end of March, with the remaining cable assets to go in the near future.
Deutsche Telekom, a former state-owned monopoly based in Bonn, also revealed that it's in talks with Deutsche Bank's investment affiliate, DB Investor, about the possible sale of a stake in other regional cable networks in the German states of Bremen and Lower Saxony. DB Investor is reportedly part of a consortium of regional partners angling for the stake.
The telecom company is already holding discussions with a Bavarian cable TV consortium about a sale of its cable assets in that state, while it negotiates with Klesch Ltd. about its cable holdings in Hesse state, and with UPC about a cable stakes in Rhineland-Palatinate and Saarland.
Callahan is one of a number of U.S. funds and buyout firms, including Kohlberg Kravis Roberts, Texas Partners and the Carlyle Group, that have
moved to take advantage of corporate restructuring in Europe by snapping up assets being spun off by the region's telecom giants.
Analysts said the nine Deutsche Telekom units up for sale are worth more than 10 billion euros. The company is Germany's leading cable-TV provider, serving nearly 18 million households, though the cable business accounts for only about 5 percent of the company's total revenues. Telekom has more than 47 million fixed phone lines and about 9 million mobile phone customers.
Shares of Deutsche Telekom (FDTE) were up 1.4 percent at 93.31 euros Thursday afternoon in Frankfurt. 
--from staff and wire reports
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