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Thursday, 31 May, 2001, 12:52 GMT 13:52 UK
Telekom seals Voicestream buy
Voicestream website
CEO Ron Sommer has staked his reputation on the Voicestream deal
The German telecoms giant Deutsche Telekom has finally closed its acquisition of the US company Voicestream Wireless.

Completion of the deal comes nearly a year after it was first announced. Telekom and Voicestream cleared their final regulatory hurdle earlier this month.

The deal, which was valued at $50bn (35bn) when it was first announced, is now worth closer to $26bn.

Beleaguered Telekom chief executive, Ron Sommer, has staked his reputation on the success of the deal.

Earlier this week at the company's AGM, he faced shareholders made angry by a 70% fall in the company's share price during the past year.

Re-jigging the deal

Since the Voicestream deal was announced, Deutsche Telekom has been forced to re-jig the terms of the acquisition.

Deutsche Telekom HQ
Deutsche Telekom has been forced to re-jig the deal
The original deal envisaged 3.2 Telekom shares and $30 cash being exchanged for each Voicestream share - a mix that would have required a cash component of some $8bn.

But in order to avoid being taxed in the US, cash paid to Voicestream shareholders could not amount to more than 17-18% of the total.

Therefore the mix has shifted toward more shares to keep the cash component within the tax-free threshold.

To finance the merger, Deutsche Telekom will issue 1.17 billion new shares, increasing its share capital by 2.99bn euros.

The new shares will also help Deutsche Telekom complete its purchase of Powertel.

$4bn cash payment

In addition, Telekom will make a cash payment of $4.23bn (4.97bn euros) to Voicestream shareholders.

The precise structuring of the deal has yet to be made public but Deutsche Telekom was due to announce details later on Thursday.

Analysts had previously speculated that falls in the German company's share price over the past year would lead Voicestream shareholders to demand a renegotiation of the deal - as, under certain circumstances, the original deal had permitted.

Expanding

Deutsche Telekom has said the acquisition of the US mobile phone operator will enable it to expand in existing and new markets.

It will also speed up development of new mobile phone products and services, the company said.

Deutsche Telekom chief executive Ron Sommer
Sommer: Under pressure from share price slump
Many analysts have been sceptical about the deal, with some even saying that Deutsche Telekom should have ditched Voicestream.

Critics have argued that Telekom would have been better off building a more commanding presence in Europe than attempting to break into the US market, where technology standards are often different.

Because of the negative reaction, Mr Sommer's fate has been closely identified with the success of Voicestream.

He has also been under pressure from shareholders because of a 70% slump in Telekom's share price in the past year.

Earlier this week Mr Sommer faced thousands of angry shareholders at the company's AGM.

Shares rise

Shares in Deutsche Telekom jumped 5% on news of the deal's close, before slipping back slightly.

At 1140 GMT, the shares were nearly 4% higher at 25 euros.

Analysts said they were pleased to see the company tilt the financing of its Voicestream acquisition towards equity, relieving pressure on its debt pile of 60bn euros.

Also on Thursday, Deutsche Telekom closed its acquisition of Powertel and confirmed that it would be selling its stake in Sprint FON.

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See also:

29 May 01 | Business
Telekom faces shareholder fury
25 Apr 01 | Business
Voicestream approval for Telekom
24 Apr 01 | Business
Deutsche Telekom narrows losses
19 Apr 01 | Business
Deutsche Telekom's debt battle
14 Feb 01 | Business
Voicestream doubt for Telekom
23 Jan 01 | Business
Telekom hit by 3G costs
09 Aug 00 | Business
Telekom delays mobile float
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