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France Tel. enters Germany
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October 5, 1999: 6:31 a.m. ET
France Telecom buys 17% stake of German cellular company, seeks control
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LONDON (CNNfn) - France Telecom shares soared 3.1 percent Tuesday as it sought to secure control of German cellular operator E-Plus, highlighting the complete breakdown of its relations with former partner Deutsche Telekom.
France Telecom announced late Monday that it had acquired a 17 percent stake in Germany's third-largest cellular company from Vodafone AirTouch (VOD) for 1.7 billion euros ($1.8 billion), and said it wanted to buy the rest of the company or secure a management contract with the remaining shareholders.
German utilities Veba (FVEB) and RWE (FRWE) each control 30 percent of E-Plus, while U.S. phone company BellSouth (BLS) controls 22.5 percent.
Veba declined to comment but RWE said Tuesday it would consider an offer. Veba announced plans last week to spin off some of its telecom assets, including E-Plus, as part of its merger with fellow utility Viag (FVIA).
The France Telecom deal values E-Plus at 10.1 billion euros.
France Telecom (PFTE) shares jumped 3.1 percent to 83.80 euros in morning trade in Paris. Deutsche Telekom and RWE both added 0.7 percent while Viag stock was flat.
. E-Plus has some three million subscribers, or about 16 percent of the German market. It's well behind the neck and neck leaders in Germany, Deutsche Telekom's D1 service and Mannesmann's (FMMN) D2 service, which both possess around 8 million subscribers. Cellular penetration in Germany is around 24 percent.
Thierry Magnan, telecom analyst at SG Securities in Paris, said the move opened up the prospect of more intense competition in the German market. "Clearly France Telecom is a big competitor and will not make life easy [for Telekom], It is much more ambitious [than Viag and Veba] and will push into new cellular activities."
The relationship between France Telecom and Deutsche has deteriorated since the German company launched a white knight bid for Telecom Italia earlier this year.
The move almost derailed Wind, an existing cellular joint venture between the French and German firms in the Italian market.
Deutsche's strategy backfired when Olivetti's hostile bid succeeded in capturing control of Olivetti. France Telecom was infuriated by its partner's move and relations have remained frosty.
While Deutsche has reaffirmed its commitment to Wind, other joint ventures between the two are threatened, including GlobalOne, the alliance formed with Sprint (FON). There is speculation that Deutsche may exit the alliance if the proposed deal between Sprint and MCI WorldCom (WCOM) goes through, although Magnan said France Telecom would prefer to negotiate a new agreement with the enlarged U.S. group.
-- from staff and wire reports
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