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Global One near collapse?
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March 25, 1999: 4:14 p.m. ET
Sprint and European partners deny report telecom joint venture is in danger
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LONDON (CNNfn) - Sprint Corp. and its Global One partners France Telecom and Deutsche Telekom on Thursday reaffirmed their commitment to their three-year old telecommunications alliance, countering reports earlier in the day that their money-losing partnership is near collapse.
"We are committed to Global One. It has made substantial progress," Sprint spokesman Bill White said Thursday.
France Telecom and Deutsche Telekom also said they still had confidence in the venture, which they expect to reach the break-even point by the end of 2001.
"France Telecom is reaffirming its confidence in the development of Global One," company spokesman Bruno Janet said.
"We are convinced, as is Deutsche Telekom, that Global One will achieve its profitability targets before the end of 2001," Janet said.
In addition, a source close to Global One told Reuters there were no plans or negotiations under way to dissolve the alliance, in which the partners have invested more than $900 million to offer multinational companies a complete range of telecommunications services.
Approach of doomsday?
The comments follow a report in the New York Times Thursday indicating the joint venture could unravel within the next six weeks.
The Times reported that Sprint chairman William Esrey wrote to his partners three weeks ago, calling on them to resolve their strategic differences.
The letter was interpreted by the European partners as a sign Sprint wanted to end its role in the partnership, according to executives close to Global One, whom the Times cites.
They indicated that Sprint is apparently frustrated by the lack of strategic commitment from its European partners and their unwillingness to increase their combined 20 percent stake in Sprint.
Sprint (FON) fears it will be left behind as the industry consolidates, and the company is seeking a more concrete link with another telecom operator, according to the Times.
The newspaper said Deutsche Telekom (FDTE) and France Telecom (PFTE) are looking to make strategic acquisitions in the European market rather than increase their Sprint stake, bought jointly for $3.5 billion. In addition, it said, Deutsche Telekom has additional concerns, including technical questions about Sprint's network.
Dissolving the Global One partnership could lead to a possible takeover of Sprint by another telecommunications company, and its European partners are likely to maintain their stake until Sprint finds a new partner rather than float the shares, the Times suggested.
What's a little fighting between friends?
The three companies have squabbled since the beginning over their level of commitment to Global One, the Times said. They have failed to integrate their networks and reach the goal of offering seamless service to clients, who include DaimlerChrysler (DCX) and Walt Disney Co. (DIS).
Still, said James Golob, telecoms analyst at Deutsche Morgan Grenfell in London, "There have always been lots of tensions, and Global One has never worked very well, but it seems to have worked better in the last six months than it ever worked before. So it is surprising that Sprint should be looking to blow it up now rather than a year ago."
Indeed, said independent telecoms analyst Jeffrey Kagan, "Alliances are inherently unstable compared to owning your own global network. Just because there is tension in the family doesn't mean the family is going to break up."
Investors were unmoved by reports of an imminent break-up. Shares in Deutsche Telekom closed up 0.7 euros at 37.6 in Frankfurt and France Telecom finished trade up 1.6 euros to 75.6 in Paris. In New York, shares of Sprint were trading higher by 2-1/8 at 98-1/8 in late afternoon trade. 
-- from staff and wire reports
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