Telecom Finance, Issue 88 February 20 2002
The deadline has passed for Liberty Media, and the American company has made no concessions. The German cartel office now has until February 28 to rule on the sale of Deutsche Telekom's six cable regions to Liberty. The cartel office wanted Liberty to offer telephone and broadband internet services, thus increasing competition in these markets and offsetting the fact that Liberty would control both transmission and content, something currently not permitted by media laws in Germany. Liberty refused to make these concessions, as it believes its offering is already competitive.
Should the cartel office definitively block the transaction on February 28, it is possible that the German government could overturn its decision, forcing the deal through. The government has a substantial stake in DT, and would lose out considerably should DT fail to realise its debt reduction plans. However, this sort of occurrence is extremely rare in German history, and is therefore a slim possibility.
Another rumour bandied around the market suggests that DT could sell to Liberty for E2bn less, thus giving Liberty room to manoeuvre around the concessions. The price is currently E5.5bn. However, a source close to the deal told Telecom Finance that this is extremely unlikely, and would not make much sense for DT.
The source went on to say that although DT is still trying to work out the deal with Liberty, this does not mean that it is ignoring the possibility that the deal could fall through. DT needs a contingency plan, and has thus not told any of its former or current suitors to go away. Some companies that gave up on the deal earlier are now sniffing around it again, in the hope that the price could fall. Compere Associates is one of the most persistent, having continually expressed its interest in the cable assets. Compere is receiving financial advice from British firm ARC Associates and Ermgassen, a German corporate finance house. Its lawyers are Denton Wilde Sapte with additional advice provided by PwC. The investment group is sceptical about Liberty's chances, and told Telecom Finance that the deal will fall through in the next couple of weeks. Deutsche Telekom is advised by NM Rothschild, and receives legal advice from Hengeler Mueller. For further details about the cable sale see TF86.
Reproduced from Telecom Finance
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