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
“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
Federal law prohibits any firm that is more than 25 percent owned by a
foreign government from acquiring an U.S. telephone company. But the law
also allows regulators discretion to waive the ownership limitation, if a
deal is deemed to be in the public interest.
Deutsche Telekom made no secret of its desire to enter the U.S.
communications market. Industry sources indicated that Deutsche Telekom
attempted to acquire Qwest Communications
the fourth largest U.S.
long-distance telephone company, after it abandoned attempts to court Sprint Corp.,
largest U.S. long-distance company, due to fears of regulatory resistance.
If regulators approve the deal, Deutsche Telecom gains an operational
foothold in the lucrative U.S. wireless service arena. VoiceStream gains
the capital necessary to become the first American firm to operate a Global
System for Mobile communication-based digital communications network.
GSM uses a variation of time division multiple access (TDMA) and is the
most widely used of the three digital wireless telephone technologies. GSM
digitizes and compresses data, then sends it down a channel with two other
streams of user data, each in its own time slot. It operates at either the
900-megahertz or 1800-megahertz frequency band.
GSM is the de facto wireless telephone standard in Europe. The format has
over 120 million users worldwide and is available in 120 countries,
according to the GSM MoU Association.
Since many GSM network operators have roaming agreements with foreign
operators, users can often continue to use their mobile phones when they
travel to other countries.
In terms of revenue, Deutsche Telekom is Europe’s largest
telecommunications company raking in more than EUR 35.5 billion in 1999. It
operates more than 14 million Integrated Services Digital Network channels,
allowing the firm to sake its claim as the world leader in ISDN services.
Deutsche Telekom is also one of Europe’s largest Internet services
providers, serving Web access to more than 5.3 million subscribers.
VoiceStream provides personal communications services with its subsidiaries
in 11 U.S. urban markets, including Denver, Seattle-Tacoma, Phoenix-Tucson,
Portland, Salt Lake City, Des Moines, Oklahoma City, Honolulu, El Paso,
Albuquerque and Boise. It is currently constructing systems to serve the
San Antonio and Austin metropolitan markets.
VoiceStream Wireless’ services and include rate plans, prepaid services,
wireless e-mail, wireless data, and text messaging, as well as global