|
Deutsche Telekom buys Powertel
|
 |
August 28, 2000: 12:01 a.m. ET
Merger partners DT, Voicestream make separate offers for smaller wireless firm
|
NEW YORK (CNNfn) - Germany's Deutsche Telekom agreed late Sunday to purchase its second U.S. wireless carrier in a month's time, striking a $5.9 billion all-stock buyout of Powertel Inc., a fast-growing mobile operator in the Southeast.
The agreement, which is contingent on Deutsche Telekom closing the $42.07-billion acquisition of Voicestream Wireless Corp. it announced last month, aims to fill a major gap in the German company's growing U.S. arsenal, which will now include cellular coverage in 24 of the top 25 U.S. markets.
Like VoiceStream, Powertel also uses the GSM standard, the most popular digital cellular standard in the world. The four-year old, West Point, Ga.-based company currently has roughly 727,000 customers in 12 Southeast states, stretching from Kentucky to Florida -- areas where VoiceStream currently offers no wireless service.
Terms of the agreement call for Deutsche Telekom to swap 2.6353 shares of its stock for each Powertel share. The company will also assume roughly $1.2 billion in Powertel debt.
Based on Deutsche Telekom's closing price on the Frankfurt Stock Exchange Friday, the agreement values each Powertel share at $105.36, a 22 percent premium from its last closing price of $86.62.
 Separately, Powertel also reached a $4.7 billion merger agreement with VoiceStream, currently ranked the No. 8 U.S. wireless company, that will only become effective should the Deutsche Telekom/VoiceStream deal fall through.
That agreement calls for Powertel shareholders to receive VoiceStream common shares at a pre-determined conversion ratio. If VoiceStream's shares close at $130.77 or above during the 20-day period ending 5 trading days prior to the closing of the deal, Powertel shareholders will receive .65 Voicestream shares. But if the Bellevue, Wash.-based company's shares close at $113.33 or below, they will receive 0.75 shares.
VoiceStream shares closed at 118.19 Friday, up 2.69. Based on closing prices Friday, the VoiceStream deal values each Powertel share at $85, a slight discount to its closing price Friday.
DT agreed to buy VoiceStream late last month to gain an international reach to 375 million customers and a foothold in North America with one of the few U.S. wireless providers using the GSM standard, the most popular digital cellular standard in the world.
VoiceStream has the broadest reach of any GSM company in the United States, reaching 2.3 million customers throughout the nation.
A Southeast U.S. presence
Combined, the three companies sill boast roughly 20.5 million customers worldwide, including more than 2.5 million in the United States. The addition of Powertel and VoiceStream will give Deutsche Telekom access to roughly 250 million licensed people in the United States.
"Powertel is the natural fit into VoiceStream's ever expanding nationwide footprint," said John Stanton, VoiceStream's chairman and chief executive.
As part of its agreement with Voicestream, Deutsche Telekom agreed to provide the U.S. wireless company with an immediate $5 billion cash infusion. None of that money, earmarked for a major sale of U.S. wireless licenses this Fall, is being used in this transaction.
The initial Deutsche Telekom/VoiceStream agreement valued the U.S. firm at approximately $174 per share. But shareholders, fearing opposition by U.S. politicians and regulators, have kept the company's shares far below that level.
Sen. Ernest Hollings, D-S.C., has introduced legislation now pending in Congress that would prohibit the Federal Communications Commission from permitting the transfer of American wireless licenses to Deutsche Telekom or any other German firm for at least a year.
Hollings, the ranking Democrat on the Senate Commerce Committee, has cited national security concerns for his proposal, noting that Deutsche Telekom is 57 percent owned by Germany's government.
The legislation would require the German state to reduce its holding to 25 percent before the deal could be approved. As it now stands, Germany's government would own roughly 45 percent of the enlarged company once the deal is completed.
Based on current stock prices, the agreement with Deutsche Telekom values VoiceStream at 158.99 a share. 
|
|
|
|
|
 |
|
