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Global One deal connects
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January 27, 2000: 10:57 a.m. ET
France Telecom, Deutsche Telekom shares up after French buy ailing venture
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LONDON (CNNfn) - France Telecom and Deutsche Telekom shares rose Thursday after a $4.4 billion deal that makes the French company the sole owner of Global One, a three-way telephone venture with U.S.-based Sprint Corp.
Telekom and Sprint, the third-biggest U.S. long-distance phone company, agreed to pull out of the money-losing alliance Wednesday. The cost of the deal to the French company includes cash and assumed debt.
Executives at France Telecom say they can turn around the money-losing venture, which had $1.1 billion in revenues last year, by linking Global One with its own networks. Business should also benefit from an end to the managerial troubles that plagued the three-way partnership, the company said.
France Telecom shares (PFTE) rose 3.7 percent to 132.6 euros in Paris, while Deutsche Telekom (FDTE) climbed 4 percent to 73.70 euros in Frankfurt on Thursday. In early U.S. trading, Sprint (FON) added 1/2 to 61-5/8.
"We are creating big synergies -- mixing France Telecom's international networks and Global One's network - that had not been possible with the three partners," France Telecom Chairman and Chief Executive Michel Bon said in a phone interview with CNN.
Bon said he expects Global One to break even by 2002. Part of that upturn may come through job reductions, he said.
"Probably in some places, there will be job cuts, and in certain others there will be an increase of people," Bon said.
Meanwhile, in its own portfolio, France Telecom is sitting on a heap of non-strategic assets it plans to put up for sale. At a news conference, Bon said his company has a portfolio of surplus assets worth 130 billion francs ($19.8 billion), which it expects to sell by the end of 2001.
Global One suffered from a rift between Deutsche Telekom and France Telecom after the German firm last year launched an unsuccessful takeover bid for Telecom Italia without first notifying its French ally.
"As a result of these operations France Telecom will acquire the approximately 71 percent shares of Global One owned by Sprint and Deutsche Telekom for a total equity value of $3.882 billion and an enterprise value of $4.346 billion," said France Telecom in a statement.
The "enterprise value" of Global One, or the total value of its stock and debt, is roughly $5.4 billion, France Telecom said.
Deutsche Telekom, which is now without an international platform, said in a statement it would use the proceeds of the Global One sale to finance "acquisitions and majority shareholdings with strong partners."
"We are pleased with the resolution with respect to the ownership of Global One," Deutsche Telekom Chairman Ron Sommer said in the statement.
France Telecom, which already owned 29 percent of Global One, said it would pay Deutsche Telekom $2.755 billion in cash for its 29 percent stake in the venture and repay the German company's total debt of $188.5 million.
Sprint, which owns 42 percent of the venture, will receive $1.13 billion in cash, with France Telecom repaying $276 million of debt. The U.S. company, which is set to merge with fellow U.S. firm MCI WorldCom, has assured service to Global One's international customers for the next two years.
Once Sprint shareholders approve the MCI WorldCom deal, both Deutsche Telekom and France Telecom will be able to sell their respective 10-percent stakes in Sprint. The European telecom companies will also give up their special rights as Class A shareholders of Sprint stock, and will resign their seats on the Sprint board.
Global One was launched in 1996 to provide international voice and data services to large corporations in 65 countries, and currently has more than 3,000 employees. 
-- from staff and wire reports
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