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Deutsche Telekom debt fear
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March 21, 2001: 6:57 a.m. ET
German phone operator faces debt rating downgrade by Moody's
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LONDON (CNN) - Deutsche Telekom may have its credit rating lowered by Moody's Investors Service on concern about the costs of third-generation mobile networks.
Share in Germany's biggest phone company fell 4.4 percent to  25.45 on Tuesday in Frankfurt. The country's benchmark stock index, Xetra Dax, was down 1.2 percent in early trade after the disappointing U.S. rate cut.
Moody's put Deutsche Telekom on credit watch after the market closed on Tuesday, saying Europe's largest telecom operator may be hurt by sinking equity markets that could affect plans to dispose of assets to trim debt.
Deutsche Telekom spent more $60 billion last year on acquiring third-generation mobile phone licences -- in the UK, Germany, the Netherlands and Austria – and buying VoiceStream Wireless in the U.S.
Moody's, the credit rating agency, said the company faced increased competition in the German wireless market and cited concerns about costs and the slow pace of third-generation wireless networks development.
The agency said it may cut Deutsche Telekom's "A2" long-term rating, Moody's sixth-highest investment grade, and its "Prime-1" short-term debt ratings. The ratings could be downgraded two notches, although by no more than that, Moody's said.
A cut in a company's debt rating can force a firm to pay higher interest on its debt.
Deutsche Telekom (FDTE) is the second European telecom operator to be threatened with downgrades by Moody's this week. Moody's said on Monday it was concerned about British Telecommunications' (BT-A) ability to reduce its $42 billion debt mountain quickly enough. Moody's placed the company on review for a downgrade.
European telecom shares have fallen more than 60 percent from a peak in March 2000, making it more difficult for telecom companies to sell assets. BT and Deutsche Telekom have planned to sell shares in their wireless units to the public.
France Telecom struggled to get its Orange mobile phone unit's initial public offering off the ground earlier this year. It was forced to cut the offering, valuing the firm at 48.5 billion ($45.2 billion) from an estimated value of 150 billion in May last year. 
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