Defying the regulators to block the deal, German and French state phone monopolies Deutsche Bundespost Telekom and France Telecom yesterday confirmed that they want to pay $4,200m for a 20% stake in Sprint Corp, Kansas City, Missouri. They plan jointly to pay $47.225 a share for 42.9m shares of a new class of Sprint stock […]
Defying the regulators to block the deal, German and French state phone monopolies Deutsche Bundespost Telekom and France Telecom yesterday confirmed that they want to pay $4,200m for a 20% stake in Sprint Corp, Kansas City, Missouri. They plan jointly to pay $47.225 a share for 42.9m shares of a new class of Sprint stock their opening stake, a $7 premium on the $40.50 price in the market and within two years after the initial investment, and then will buy another 42.9m shares of the same class at a maximum $51 a share. The two European monopolies will get seats with voting rights on the Sprint management board and say they intend to set up three new companies to operate networks and services. The alliance will initially offer international data, basic telephone and video services for multinational corporations, international calling card services for private customers and carrier-for-carrier services where it will carry traffic for other carriers. The trio will set up a separate venture to build and maintain a global fibre optic backbone network linked to each partner’s regional telephone networks – and Mercury Communications Ltd could be brought into this, because Sprint is the 50% shareholder in Mercury parent Cable & Wireless Plc’s PTAT-1 transatlantic fibre optic cable; however it does not need Mercury because it has a UK operator’s licence of its own. But initially, Sprint will hold 50% of the network and Deutsche Telekom and France Telecom will hold a combined 50%. Sprint will hold 33% of a company to be set up to offer communications services in Europe excluding the German and French home markets. A third company will be set up for operations outside the US and Europe, with Sprint again holding 50% – but additional partners will be sought for this. The trio plans a supervisory board to oversee operations and set international strategy. Chairman of Sprint William Esrey said he expected regulators in the US to approve the alliance, but given the hurdles placed in the way of British Telecommunications Plc’s buying of a 20% stake in Sprint rival MCI Communications Corp, it seems highly unlikely that it will be approved any time soon when in sharp contrast to the UK market, the French and German markets are completely closed to competition in basic telephony. There is also the thorny issue of market access for equipment manufacturers: France Telecom favours Alcatel NV for its equipment orders, Telekom favours Siemens AG, and the US can be expected to demand open competition for the likes of AT&T Co and Canadian Northern Telecom Ltd before agreeing to the deal. A further stumbling block is the blatantly protecti onist European Union rule that a bid from a local company must be favoured if it is no more than 3% more expensive than a foreign riv al. Esray also confirmed that the talks between Sprint and Electronic Data Systems Corp were on again: There have been many stories why our merger talks failed and I can tell you that it was only our ina bility to agree on valuation, he said. We are in discussion with EDS now for ways, short of an out right merger, to co-operate, he added. And Bundespost Telekom chairman Helmut Ricke said that he would set up a separate Telekom In ternational enterprise if the Germ an government fails in its efforts to privatise the telephone company.