WASHINGTON-Despite concerns that mounting losses at Voice-Stream Wireless Corp. and Deutsche Telekom AG could threaten a transatlantic merger whose value has plummeted since its announcement last July, signs still point to completion of the deal early this spring.
Indeed, there is growing pressure on the Federal Communications Commission to approve the transaction sooner rather than later in order to stabilize the precarious state of affairs in which VoiceStream and DT now find themselves.
A group of lawmakers from Voice-Stream’s home state of Washington have written new FCC Chairman Michael Powell, seeking to give the matter a sense of urgency.
“We believe the record compiled by the FCC demonstrates that this merger should be approved quickly,” said Reps. George Nethercutt (R-Wash.), Jennifer Dunn (R-Wash.), Norm Dicks (D-Wash.), Doc Hastings (R-Wash.), Adam Smith (D-Wash.), Jay Inslee (D-Wash.), Jim McDermott (D-Wash.), Rick Larsen (D-Wash.) and Brian Baird (D-Wash.).
Mickey Kantor, U.S. trade representative and Commerce Department secretary in the Clinton administration, also has written the FCC in support of the deal at Voice-Stream’s request.
The lawmakers said the proposed merger would foster wireless competition, consumer choice, innovation and job creation in the United States. The Justice Department gave the deal antitrust clearance last September, the same month the proposed merger was filed with the FCC.
The FCC’s International Bureau, and to a lesser extent, the Wireless Telecommunications Bureau, are working on the VoiceStream-DT deal. Federal regulators are approaching a self-imposed 180-day deadline for completing their review of the proposed merger, which was valued at $50.7 billion last July but is now put at $30 billion.
VoiceStream shareholders are expected to approve the merger at a special March 13 meeting.
Under the terms of the VoiceStream-DT merger agreement, either side can walk away from the deal-or simply decide to renegotiate it-if the proposed merger is not completed by early summer. Attachment of adverse conditions to the merger also could kill the deal.
Such a consequence would be a major blow to VoiceStream-which dearly needs financial backing to remain viable as one of six national wireless carriers in the United States-and to Chairman John Stanton personally.
Stanton stands to make more than $1 billion from the deal. Moreover, if the deal is completed and Stanton remains as the top U.S. executive of DT-VoiceStream, he supposedly would have the freedom to pursue other business ventures on the side that do not directly compete with mobile-phone operations.
The VoiceStream-DT transaction, if approved, could become a model for future telecom mergers in the global economy as wireless carriers-needing scale to compete and requiring massive sums of money to build third-generation mobile phone systems-look outside the United States for additional capital.
The proposed merger is being watched closely here and overseas because it carries global trade implications. If the United States-arguably the world’s strongest free-trade advocate in recent years-were to nix the proposed VoiceStream-DT merger, it could undermine America’s standing in the World Trade Organization and possibly trigger retaliation.
Bert van Barlingen, head of the European Commission’s trade section, bluntly made that point in a Jan. 25 letter to the State Department.
The Washington delegation in the House reiterated it in its Feb. 16 letter to the FCC’s Powell.
“If the FCC were to disregard those [WTO] commitments, or to interpret U.S. law or its rules in a manner that conflict with those commitments, the FCC would start a trade war that could damage exports in any sector of the U.S. economy, not just telecommunications,” stated Washington state lawmakers.
FCC rules limit overseas firms more than 25-percent owned by foreign governments from acquiring American telecommunications firms. However, the FCC has the discretion to waive the 25-percent rule under its public interest powers.
Sen. Ernest Hollings (D-S.C.), the influential ranking minority member of the Commerce Committee, pursued legislation last year that would have killed the VoiceStream-DT deal. Hollings, who early on enlisted the support of other lawmakers before they abandoned him on the issue, argued the deregulated U.S. telecom industry should not have to compete with large foreign firms that are subsidized by their governments.
The German government owns 44 percent of DT, but the government has promised to dilute its interest in the telecom giant in coming years.
In addition to foreign ownership and competition (some parties allege DT thwarts competition in Germany), national security was briefly raised as an issue in the proposed merger of VoiceStream and Deutsche Telekom.
Washington state lawmakers said VoiceStream and Deutsche Telekom have entered a national security agreement with the Justice Department and the Federal Bureau of Investigation. The two firms agreed to make national security compliance a condition of licenses VoiceStream wants to transfer to Deutsche Telekom. A Treasury Department-led interagency group will have final say on national security aspects of the proposed merger.
