Telecommunications, August 1999, p. 15
BONN - The fall-out from Olivetti's successful take over of Telecom Italia (TI) continues to have widespread consequences for jilted suitor, Deutsche Telekom (DT), across Europe and in the German carrier's global activities.
DT has signalled its willingness to buy France Telecom's (FT) share in Global One, the global service provider owned by DT, FT and Sprint. Relations between DT and FT have been strained since DT's abortive bid to merge with TI and industry analysts are unsurprised by DT's announcement. Paul Lufkin, of investment bank ARC, commented: "Although it had no affect on Global One's business, the TI deal did a lot of damage. The basis of large shareholder ventures is trust and individual shareholder activities often undermine it."
Lufkin thinks it likely FT will sell its stake to DT. However, he suspects there is more than an over-hyped breach of trust underlying FT's actions. "The Telecom Italia deal gives France Telecom an excuse to back out of something that's not doing well." This view gains considerable weight in the light of Global One's lack of profitability - the combine is not expected to break even until 2001 and FT may be happy to pursue its global ambitions on its own.
Should DT's offer come to fruition, its beleaguered chief executive, Ron Sommer, will be under even greater pressure. Ownership of two thirds of Global One puts most of DT's international 'eggs' in one basket - and Sommer, whose shareholders are losing patience, cannot afford to make more mistakes. Another potential minefield for Sommer is the sale of UK wireless operator One2One for an anticipated US$ 10 billion. The bidding process will provide Michel Bon, FT's chief executive, with a good opportunity to bloody DT's nose and reclaim FT's pride. None of this, however, will help Global One. - GM
Reproduced from Telecommunications ®
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