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Deutsche Telekom Pockets U.S. Wireless Firm

Deutsche Telekom AG Monday moved to acquire one of the last independent U.S. wireless companies, VoiceStream Wireless Corp., in a deal estimated to be worth $50.7 billion.

Both boards have approved the merger, which awards VoiceStream shareholders 3.2 Deutsche Telekom shares and $30 in cash for each share of common stock, subject to certain adjustments.

The infusion of German funding into the struggling U.S. wireless firm includes a separate $5 billion cash investment in VoiceStream to accelerate its nationwide build-out and upgrade its network and services operating on European wireless standards.

At the end of March, T-Mobile, together with VoiceStream and its joint ventures, provided wireless services to more than 19.8 million subscribers. The partners also owned licenses to provide services to approximately 375 million people worldwide.

VoiceStream will become part of Deutsche Telekom's mobile telephony group, which is a separate subsidiary of Deutsche Telekom AG . VoiceStream senior management will lead Telekom's U.S. mobile operations, continuing to use the VoiceStream brand.

John W. Stanton, VoiceStream chairman and chief executive officer will head Deutsche Telekom's mobile operations in the U.S. Stanton said the merger is a compelling strategic opportunity for VoiceStream to partner with one of the world's leading telecommunications companies.

"It is also an extremely attractive opportunity for both sets of shareholders and for our employees," Stanton said. "We see enormous benefits for U.S. consumers, as VoiceStream becomes an even more competitive national operator that can accelerate the introduction of next-generation wireless voice and data services.

"Together, we can offer seamless global services over a common technology platform and provide customer-friendly features such as global roaming, unified billing and worldwide customer service," Stanton added.

Dr. Ron Sommer, Deutsche Telekom chairman and chief executive officer, said the transaction is a unique opportunity to enter the U.S. wireless communications market.

"American consumers will see an acceleration in the rollout of state-of-the-art GSM technology," Sommer said. "More Americans will be able to have one phone, with one number, that they can use virtually anywhere in the world, whether they are in Minneapolis, Munich or Melbourne."

VoiceStream holds 107 broadband licenses covering approximately 62.6 million potential subscribers nationwide. As of December 1999 VoiceStream Wireless served 322,400 PCS customers in the U.S.

Jeffrey Hedberg, Deutsche Telekom board member in charge of international operations, said VoiceStream is growing its subscriber base faster than any other national wireless carrier in the U.S.

"With licenses to serve approximately 220 million people in 23 of the top 25 U.S. markets, VoiceStream has only begun to tap its extraordinary potential," Hedberg said. "VoiceStream is also well positioned for mobile data applications, a potentially explosive growth area as booming U.S. Internet usage should drive heavy mobile data demand."

The transaction is subject to regulatory approvals, approval by VoiceStream shareholders, and customary closing conditions. The companies anticipate that the deal will be done in the first half of 2001.

When the merger is completed, VoiceStream shareholders will own approximately 22 percent of Deutsche Telekom and the German Government's ownership of Deutsche Telekom will shrink to about 45 percent.

The German Government, which currently owns 59 percent of Deutsche Telekom, is committed to continue reducing its stake in the telecom firm, subject to certain market condit