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Wednesday, 14 February, 2001, 22:25 GMT
Voicestream doubt for Telekom
Deutsche Telekom's Bonn headquarters
Telekom might have to raise its Voicestream offer
Shares in Deutsche Telekom slid to fresh two-year lows on Wednesday, increasing doubts that the company's acquisition of US operator Voicestream would go ahead as planned.

In early afternoon trading in Frankfurt, the shares were down 5.7% at 28.80 euros as investors continued heavy selling of European telecom firms one day after the disappointing stock market debut of France Telecom's Orange.
Deutsche Telekom chief executive Ron Sommer
Sommer: Under pressure for Voicestream, 3G costs

The latest falls in Telekom's share price are especially significant because, if sustained, they might allow Voicestream to demand a renegotiation of the $34bn (23bn) takeover deal.

Under the terms of the deal, the US company's shareholders would be allowed to demand renegotiation if Telekom's share price averaged less than 33 euros for seven days within the 15 trading days before closure of the deal.

Telekom has said it plans to complete the deal in mid-2001 and has denied that it was pushing back the completion date to try to avoid any extra payments.

Question mark over Sommer

Investors were also spooked on Wednesday by rumours that Telekom chief executive Ron Sommer had resigned - a suggestion the company later said was "without foundation". Mr Sommer has championed the Voicestream deal as his top priority.

Analysts said he was unlikely to survive its abandonment but was not expected to go before the deal was finally either signed off or scrapped.

However, a depressed share price could reawaken investor concerns over perceived failings of Mr Sommer - such as the aborted merger with Telecom Italia and the high prices paid for Voicestream and new European mobile phone licences.

Some analysts have said that, given market conditions, Telekom should ditch Voicestream, even if it does not have to further sweeten its takeover offer.

They argue that the company would be better off building a more commanding presence in Europe, where it has only acquired new, third-generation mobile phone licences in Germany, the UK and the Netherlands.

T-Mobile float in doubt?

Weak market sentiment also places a question mark over Telekom's plans to float its wireless unit T-Mobile later this year.

The company on Wednesday said it had not set a date for the flotation and was not under any time pressure to do so.

However, the flotation does form an important part of the company's plan to reduce debt built up acquiring third-generation mobile phone licences.

Telekom's debts are expected to rise to some 60bn-65bn euros and the company has said it wants to slice about 29bn euros off this by the end of the year.

Deutsche Telekom shares have lost about two thirds of their value in the past 12 months and underperformed the German utilities and telecoms sector by about 33% in the same period.

Full approval awaited

Voicestream shareholders are due to vote on the Telekom takeover on 13 March.

The deal has been cleared by US anti-trust authorities and the Federal Bureau of Investigation, but awaits approval from the Federal Communications Commission.

The FCC can still block the takeover if it concludes it is against the public interest.

Some US members of congress have argued that the German government's 44% stake in Deutsche Telekom has implications for both competition and US national security.

Widening losses

Voicestream reported on Wednesday that its net loss grew to $807m last year, compared to just $151.7m the previous year.

Revenue however tripled, and the US firm gained 602,000 new subscribers in the last three months of last year.

The company now has almost 4 million subscribers in the US.

The increase in revenue but widening losses demonstrates the extent of the debt being absorbed by mobile phone companies which bid to operate third generation licences.

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See also:

23 Jan 01 | Business
Telekom hit by 3G costs
23 Nov 00 | Business
Telekom bows out of French auction
26 Sep 00 | Business
Germany to cut Telekom stake
09 Aug 00 | Business
Telekom delays mobile float
24 Jul 00 | Business
Telekom snaps up Voicestream
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