|
France Télécom defiant
|
 |
April 19, 1999: 9:57 a.m. ET
French firm warns German-Italian tie-up could breach alliance terms
|
LONDON (CNNfn) - In a display of jitters over the prospect of being left out in the cold by a world-beating alliance between Deutsche Telekom and Telecom Italia, France Télécom warned Monday that a tie-up would breach the terms of its joint venture with the leading German telecom.
France's largest company said "it is too early to measure all the consequences for the French-German partnership."
Nonetheless, it said "Our agreements with Deutsche Telekom are clear and incompatible with a unilateral strategic reversal." Under terms of the agreement, the companies must apprise one another of their activities beyond their home markets.
France Télécom also insisted Deutsche Telekom would be obligated to sell its interest in the Wind telecom joint venture if it paired with Telecom Italia. Deutsche Telekom is a partner in the venture with France Télécom and Italy's Enel.
The statement reflected France Télécom's distress at Telecom Italia and Deutsche Telekom's confirmation Monday that they are in talks to create an unrivaled European telecom colossus.
With $216 billion in market capitalization, a merged group would surpass in scale any previous corporate combination.
Telecom Italia's board is meeting Monday in Rome. The two companies could divulge the terms of a deal as early as Tuesday, according to published reports.
France Télécom shares have come under enormous pressure as talk of the emerging link has edged closer to a reality in recent days.
The deal is seen as sidelining the French firm at a time when global telecom consolidation makes it imperative for phone carriers to cut costs and seek allies as they fend off a growing threat from nimble mobile companies.
The French government has been trying to reduce its 60 percent stake in France Télécom, but a further unwinding could be hampered by a German-Italian telecom marriage that makes the French company seem less attractive to investors.
On Monday, France Télécom led the decliners on the Paris bourse, plunging more than 6 percent to 75.75 euros after Broker CCF cut its rating to "reduce" from "add."
"France Télécom is going down in a ball of flames," a trader told Reuters in Paris Monday. "It looks like [it is] getting marginalized by an alliance between Telekom and telecom Italia, which would be the largest player in Europe, and on top of that is still owned by the government, so nobody is likely to want to do any deals with it."
France Télécom and Deutsche Telekom have 2 percent cross shareholdings. The companies also are joint partners with Sprint Corp. in the three-year-old Global One telecommunications alliance.
In recent weeks, reports have emerged suggesting the alliance could be on the verge of unraveling, with some speculation centering on the prospect that Deutsche Telekom could buy out Sprint.
Such a move, originally reported in a German magazine and which Deutsche Telekom has declined to comment on, would effectively render France Télécom a junior partner in Global One.
France Télécom said its only "significant activity" with Deutsche Telekom in Europe is the Wind venture with Italy's Enfel.
Separately, Deutsche said a deal with Telecom Italia wouldn't hurt its alliance with France Télécom, Reuters reported. 
--from staff and wire reports
|
|
|
|
|
 |
|
