U.S. Questions Deutsche Telekom’s Ties to German Government
U.S. regulators have zeroed in on the German government’s ties to Deutsche Telekom as they review the proposed acquisitions of VoiceStream Wireless Corp. and Powertel Inc., a letter sent to the companies revealed Tuesday.
The Federal Communications Commission sent the three companies a list of 23 questions Feb. 2 probing, among other things, what influence the German government has on Deutsche Telekom’s business strategy and how members of its boards are appointed.
Also, the U.S. agency asked why Deutsche Telekom received convertible preferred stock instead of common stock in exchange for a $5-billion investment last year and how the related ownership interest in VoiceStream was calculated, a letter to the companies released Tuesday said.
Bellevue, Wash.-based VoiceStream agreed in July to be acquired by Deutsche Telekom in a $34-billion deal. VoiceStream in turn agreed to acquire West Point, Ga.-based Powertel in August for about $6 billion.
The deal has come under fire from some U.S. lawmakers, led by South Carolina Democratic Sen. Ernest Hollings, who have expressed concern that the German government’s 44% stake in Deutsche Telekom could affect competition and U.S. national security.
The German government has pledged to eliminate its stake in the telecommunications giant.
U.S. law allows the FCC to block foreign telecommunications companies that are more than 25% government-owned from buying a U.S. company if it determines the deal is not in the public interest.
“It’s quite clear they’re trying to accommodate in every way possible concerns raised by Sen. Hollings as to the relationship between the German government and the independent company DT,” a source close to VoiceStream told Reuters.
“The Commission apparently wants to satisfy themselves that the passive German government ownership is indeed passive and they’re not exercising control,” the source said.
Deutsche Telekom American depositary receipts fell $2.51 to $27.41 on the New York Stock Exchange after Moody’s Investors Service changed its ratings outlook for the company to negative from stable. VoiceStream shares fell $9 to $107.31 and Powertel shares fell $6.88 to $68.31 on Nasdaq.
