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Fr. Tel fumes at Deutsche
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April 30, 1999: 11:04 a.m. ET
Report: French telecom giant will seek sanctions if TI merger goes through
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LONDON (CNNfn) - France Telecom will seek monetary damages against Deutsche Telekom to recoup the costs of its investment in their five-month-old European alliance if Deutsche's planned merger with Telecom Italia goes through, the French company's president told a French newspaper.
"We have to defend our rights and the interests of our shareholders. … It's normal and logical that a company that violates an agreement should be sanctioned and face some difficulties, " France Telecom's president, Michel Bon, said in an interview with France's Le Monde newspaper on Friday.
Reiterating France Telecom's defiant official stance, Bon said he views Deutsche's planned $82 billion tie-up with TI, unveiled on April 22, as a flagrant breach of a pan-European cooperation pact signed by the French and German giants last Dec. 1.
Under the terms of that accord, Bon maintained, both partners were obliged to inform the other -- in writing -- of any plans to form alliances with a third party.
Each partner is also supposed to be given an opportunity to take part in the alliance.
Bon told Le Monde Deutsche had failed to take either action, constituting a violation of their accord. Deutsche counters that it never intended its actions to pose a threat to its France Telecom alliance.
Deutsche Telecom officials could not immediately be reached for comment.
Bon sought to stake out the moral high ground in the interview, suggesting that France Telecom had acted with more restraint than its partner when faced with similar circumstances.
He said that when Olivetti initially launched its hostile bid for Telecom Italia -- well before the announcement of the Deutsche-TI deal -- he and others had been approached by bankers looking for a white knight.
"At least two reasons dictated against our being interested," Bon said. "Our engagements vis-a-vis Enel, our Italian partner at the heart of Wind (a joint venture), and the certainty that the European competition commission would, at the very least, impose very costly conditions."
Bon said the alliance, built on a principle of parity between two state-controlled giants, with Deutsche had shown fissures well before the TI deal.
"The engines of the alliance had been slowing over the past two years," he said, noting several cases involving projects in Spain, Denmark and the Netherlands in which he said Deutsche had been reluctant to invest.
Bon would not specify the total damages his company intends to seek against Deutsche Telekom.
"We haven't yet come up with any precise figure," he said. "It will be necessary to evaluate the cost of our withdrawal from the German market in 1996, which was considerable, the cost of the damage incurred by our mutual affiliates, in Italy for example, and the opportunity costs of lost investments, especially international ones."
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