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Callahan buys Telekom unit
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February 22, 2000: 9:51 a.m. ET
U.S. investor acquires 55% stake in German cable operator
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LONDON (CNNfn) - Deutsche Telekom said Tuesday that it had sold one of its nine domestic cable-TV units to U.S. investment group Callahan Associates International in a deal valued by analysts at between 2.5 billion and 3 billion euros ($3 billion).
The deal marks the first step in the disposal of nine cable networks, which Telekom is divesting under pressure from European regulators as part of the deregulation of the region's telecom sector.
It also boosts the European presence of Denver-based Callahan, which already has major stakes in cable operators in France and Spain and is investing heavily to upgrade its operators to provide broadband Internet services.
Germany's largest telecom company has repeatedly changed the terms and timetable for selling the cable businesses, which serve a total of 18 million homes. The company said that it was in talks to sell another five of the regional operations and aimed to complete deals by the end of March.
Callahan will take a 55 percent stake in Telekom's North Rhine-Westphalia TV unit, the largest of those being sold, with the German company retaining a 45 percent stake. The deal is expected to be completed on July 1, subject to regulatory approval.
Callahan is one of a number of U.S. funds and buyout firms, including Kohlberg Kravis Roberts, Texas Partners and the Carlyle Group, that have swooped to take advantage of corporate restructuring in Europe by snapping up assets being spun off by the telecom giants.
Callahan's investment partners include Blackstone Capital Partners III, Capital Communications CDPQ, Bank of America and GE Capital, and the Telekom unit will join a portfolio of European cable assets that include Cableuropa in Spain and a 37 percent stake in Numéricable, the French operator controlled by Canal Plus (PCAN), which reaches 2.2 million households.
The deal, for which it did not disclose a price, also signals Telekom's reversal of its previous plan to sell only a minority stake, float 40 percent and retain about 25 percent in each of the units. It said Tuesday it will sell 55 to 65 percent of each and retain 25 percent plus one share. Analysts said the nine units are worth more than 10 billion euros.
Deutsche Telekom (FDTE) shares were almost 1 percent higher at 88.40 euros in afternoon trading. The stock has surged this year on the prospect of asset sales. Its upcoming plans include the flotation of a minority stake in its T-Online Internet access service and the possible offering of a stake in T-Mobile, its cellular-phone unit. 
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