The Cutting Edge: Computing / Technology / Innovation : Sprint in Talks With 2 European Firms : Telecommunications: Possibility of pact with French and German phone companies follows collapse of EDS merger.
One day after ending merger talks with Electronic Data Systems Corp., Sprint Corp. said Tuesday that it is exploring a deal to sell a large portion of itself to two European telephone companies.
The possible partnership with Deutsche Telekom of Germany and France Telecom of France, both state-owned phone monopolies, would “concentrate mainly on providing seamless, global telecommunications services to business customers,” Sprint said in a statement.
Details were not disclosed. But executives at Sprint, which operates the United States’ third-largest long-distance network and owns local telephone systems, said the Europeans might purchase a special type of Sprint stock at above-market prices and gain seats on Sprint’s board.
Sprint’s merger talks with Electronic Data Systems, a Dallas-based computer services company, collapsed in part because of disagreement over the value of each company’s stock. Sprint’s stock rose in response to the latest news, climbing $1.375 to $39.375 on the New York Stock Exchange.
Any deal reached with the Europeans would face the scrutiny of U.S. and European regulators. “I’m sure there will be lots of inquiries,” said an official at the Federal Communications Commission.
U.S. law bars a foreign investor from directly owning 20% or more of any company licensed by the FCC. Indirect foreign ownership is limited to 25% and must be approved by the FCC.
The Justice Department reportedly is negotiating changes to a similar foreign investment plan in which British Telecommunications proposes to buy a 20% stake in MCI Communications Corp. of Washington, the No. 2 long-distance carrier in the United States.
Though the European Community is pressing its member countries to open their telecommunications markets, neither France nor Germany allows competition in its local or long-distance telephone services.
Sprint’s move is part of a trend among phone companies worldwide to form alliances that can offer large companies one-stop shopping for international long-distance services. That market is estimated at $10 billion a year and is growing at a rate of 20% annually, according to some estimates.
