Deutsche Telekom said it is raising around $12 billion, some of which will be used to fund new acquisitions, leading to speculation that the German operator may merge with Telecom Italia.
Ron Sommer, Deutsche Telekom's chief executive, said yesterday the incumbent operator is ready to invest cash raised from its second public share offer anywhere in the world, but hinted that Europe was the most likely target.
Sommer has already been in talks with Telecom Italia's chief executive, Franco Bernabe about a possible merger, according to reports Friday. A merger would rescue the Italian operator from its $65 million hostile takeover bid by Olivetti.
At a news conference on Deutsche Telekom's financial results in Bonn on Thursday, Sommer said it plans to issue up to 286.3 million new shares in June this year. The shares are currently trading at about DM80 ($43).
"The capital increase is the best way for us to further accelerate our future development. It will considerably boost our financial strength and in this way give us the financial leeway we need, enabling Deutsche Telekom to take appropriate action at any time to do the groundwork for future successes," he said.
"In this context, we are pursuing two specific strategies. They are: First to further bolster the business area with promising growth rates in the coming years. And second to further consolidate our international market position," he said.
"I do not exclude any part of the world. But we have always said that Europe is our home and that after Europe is the US and Asia," he said.
Deutsche Telekom holds a major stake in Hungarian operator Matav and more recently took a majority stake in Austrian mobile telephony operator Max.mobil, he said.
Deutsche Telekom is standing by its Global One partners, France Telecom and Sprint in the US, and the alliance is focusing on the most important revenue driven sectors, he said, noting that he expects Global One to break even in 2001.
Finance director Joachim Kroeske said Deutsche Telekom's share of Global One's losses were DM450 million in 1998. Sommer said its sales in 1998 were US $1.1 billion.
On domestic competition, Sommer said Deutsche Telekom plans its investments for the long term but is "forced" to sell "subsidised" interconnection services to new entrants, "to make someone else rich ... We can't always support competitors with mother's milk."
However the "drastic" drop in prices over the past year means consolidation is happening much sooner than expected, he said, noting how margins have also fallen "dramatically", making having one's own infrastructure more important.
US criticism of Deutsche Telekom for failing to promote the online economy, such as from AOL Europe, is unjustified he said, pointing out that Deutsche Telekom's T-Online Internet business has three million subscribers.
"Now the US competitors criticise us and take us to the German courts. The US is still lagging far behind Germany in liberalisation," he said.
Additional reporting by Andrew Craig To comment on this story, email [email protected]
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