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Telekom seeks to repair rift
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May 5, 1999: 8:55 a.m. ET
German firm says Italia merger doesn't exclude cooperation with French partner
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LONDON (CNNfn) - As the head of Deutsche Telekom was trying to repair the growing rift with its French partner over the proposed merger with Telecom Italia, Rome once again threatened to scuttle the deal.
Ron Sommer, chief executive of the German telecommunications carrier, held out an olive branch to France Telecom Wednesday, when he said that any enlarged group resulting from the merger with Telecom Italia still could participate in Telekom's current Global One joint venture with the Paris-based carrier and Sprint Corp. of the U.S.
"We stand behind Global One. A merged company could contribute more to Global One than Deutsche Telekom or Telecom Italia alone," Sommer said at a press conference in Bonn, Reuters reports.
France Telecom President Michel Bon lashed out at his German partner last week, calling the proposed merger "a flagrant breach of a pan-European cooperation pact" that Telekom and its French partner signed last December.
Bon said he plans to sue his German partner if it proceeds with the merger. Sommer, however, rejected this threat and said there is "no basis at all" to seek damages.
French first choice
Indeed, the German carrier revealed that it had sought a merger with France Telecom before it turned to its intended Italian partner. "There were talks with France Telecom about creating a European carrier," Telekom's chief financial officer, Jochim Kroeske, told Reuters.
In Italy, doubts about the success of the merger were heightened after communications minister Salvatore Cardinale reinforced Rome's concerns about the German state's stake in Deutsche Telekom.
"The government sees the merger as an important opportunity on condition it does not mean Telecom (Italia) will be subjugated to Telekom and directed by the German government," he said.
Cardinale said the government will use its so-called "golden share" to block any deal if Bonn doesn't commit to the privatization of Telekom.
Cardinale opposed
He also revealed that he is opposed to the deal. "I am one of those who do not look favorably on this joint venture, but the initial conditions of parity and privatization must be met nonetheless," Reuters reported Cardinale as saying.
These comments came as the German carrier gave more details of its planned capital increase, which it expects to complete by the end of June.
The rights issue is expected raise up to $11 billion and could see the German government's stake diluted from the current 72 percent to around 65 percent, after Bonn said it doesn't plan to take up its allocation. 
-- from staff and wire reports
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