Deutsche Telekom Wins FCC Approval in $34-Billion Purchase of VoiceStream

Deutsche Telekom’s $34-billion takeover of VoiceStream Wireless Corp. won regulatory approval Wednesday, removing the biggest obstacle to U.S. entry for the telephone company that is partly owned by the German government.

The Federal Communications Commission also let Deutsche Telekom buy Powertel Inc., giving it 5.4 million U.S. wireless subscribers and a nationwide network. The agency, rejecting opposition from some U.S. lawmakers, said the combination would benefit the public by letting VoiceStream become a stronger competitor.

Some members of Congress said Germany’s 58% stake in Deutsche Telekom would give the company a financial advantage over rivals. The FCC downplayed the fears, saying the German stake will fall to 45% after the purchase is completed, expected by the end of May.

Consumers “will benefit from the resulting increase in competition in mobile services, including new communications services and features,” the FCC said. Deutsche Telekom will “have neither the incentive nor the ability to engage in unfair competition, specifically predatory pricing.”

A committee that reviews foreign investment in U.S. companies must approve the combination.

“We’re very relieved and very pleased,” said Ulrich Lissek, a spokesman for Deutsche Telekom. “We hope to stay on schedule for the closing at the end of May.”

The agency’s 4-0 approval will help guide other foreign government-backed companies seeking to invest in the U.S. and ends a nine-month trade battle by Bellevue, Wash.-based VoiceStream and Deutsche Telekom, based in Bonn.

At issue is a 1934 law that banned foreign companies from owning U.S. communications assets. A 1997 World Trade Organization agreement relaxed the prohibition and the FCC has the power to waive restrictions for mergers in the “public interest.”

Democrats Sen. Ernest Hollings of South Carolina and Rep. John Dingell of Michigan last year led unsuccessful efforts to change the law and thwart the purchase, saying Congress never intended to let companies controlled by foreign governments own U.S. phone companies. That angered European trade officials.

Hollings said he is “deeply disappointed” by the approval and plans to introduce legislation to curb the German government’s interest in VoiceStream, the seventh-largest mobile-phone company.

“Unfortunately, today’s action is a retreat from free market competition,” he said in a statement distributed to reporters.

The legislation he plans to introduce would require foreign governments to sell stakes that exceed 25% in U.S. phone companies by December. Although he didn’t mention Deutsche Telekom by name, it is the only company that would be subject to such a measure.

Deutsche Telekom still faces a review by the Committee on Foreign Investment in the United States. Analysts say resolution by the Federal Bureau of Investigation in January of unspecified security issues will lead to committee approval.

Shares of VoiceStream rose $2.28 to close at $106.11. Deutsche Telekom’s American depositary shares rose 19 cents to $25.94.