Deutsche Telekom AG agreed to acquire Voicestream Wireless for $US50.7 billion, with both companies hailing the long-rumored deal as bringing more competition to the US cellular telephone market.
The merger faces an uphill battle in Congress, however, where late last month Sen. Ernest "Fritz" Hollings (D-S.C.) introduced legislation that would prevent any company directly or indirectly controlled by a foreign government from acquiring a US telecommunications carrier. The German government currently owns 59% of Deutsche Telekom.
Analysts say they don't view the Hollings legislation (Senate Bill 2793, the Foreign Investment Act of 2000) as a deal killer.
"The bill is not a credible threat. It's too protectionist," said Elliott Hamilton, an analyst at the Strategis Group in Washington. "It's not going to stop the deal, but could delay it, making both companies go through more hoops."
The European Commission downplayed Monday its concerns over the legislation that would prohibit the takeover of US firms by any foreign company in which the foreign government owned more than 25% of the shares.
"It is not yet certain that the bill will get congressional approval, but if it were to be adopted, it would have international trade implications," a European Commission spokesman said.
The commission has started talks with US officials to prevent adoption of the bill. But it's still too early to say whether the European Union will eventually complain to the World Trade Organisation, the spokesman said.
Deutsche Telekom and Voicestream portrayed the deal as a way to build a formidable US wireless carrier that would operate under the international Global System for Mobile communications (GSM) standard.
"This transaction is a unique opportunity to enter the US wireless communication market, one of the most attractive in the world," Deutsche Telekom Chairman and CEO Ron Sommer said in a statement. "American consumers will see an acceleration in the rollout of state-of-the-art GSM technology. 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. As in other markets, such as the UK with One 2 One, we are partnering with a rapidly growing, nationwide, domestic wireless company."
"This is a compelling strategic opportunity for VoiceStream to partner with one of the world's leading telecommunications companies," said John W. Stanton, chairman and CEO of Bellevue, Wash.-based VoiceStream, who will head Deutsche Telekom's mobile operations in the US. "We see enormous benefits for US consumers, as VoiceStream becomes an even more competitive national operator that can accelerate the introduction of next-generation wireless voice-and-data services such as mobile Internet and multimedia applications. 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."
That mobility currently comes at a high price for US wireless customers used to bulk-rate plans from other carriers that provide nationwide roaming and charge about $30 to $50 a month for 400 to 500 minutes of talk time. Voicestream subscribers roaming on Deutsche Telekom's German network pay 56 cents a minute off-peak and $1.12 a minute for calls during the peak business hours. Voicestream subscribers calling the US from Germany are charged $1.12 a minute in peak periods and 67 cents a minute off-peak.
Rick Perera writes for the IDG News Service in Berlin. Elizabeth de Bony in the Brussels bureau of the IDG News Service also contributed to this article.