VoiceStream Wireless Corp. last week reiterated its confidence in its merger with German operator Deutsche Telekom as both companies’ stock values dropped since the merger announcement.
By press time, the deal was valued at about $45.3 billion, or $171 per VoiceStream share, compared with $50.7 billion, or $195 per share, when the companies first announced the deal.
“We are very optimistic about DT stock, but we recognize there has been some temporary dislocation in the stock,” VoiceStream Chairman and CEO John Stanton told analysts last week during the company’s second-quarter earnings call. “We do have a non-reciprocal right to terminate the deal if DT’s stock is below 33 euros at the time shortly before the close. We do believe the transaction represented the best value for our shareholders.”
Stanton said his company began pursuing a merger once BellSouth Corp. and SBC Communications Inc. announced plans to merge their wireless businesses.
“The combination of SBC and BellSouth’s wireless businesses forced us to look and eventually seek alternatives to using their GSM systems in the Carolinas and California,” said Stanton. “While they continue to be our partners, it’s apparent we need spectrum and to build systems.”
As a result, Stanton said Voice-Stream will use DT’s additional $5 billion investment to heavily participate in the re-auction of C- and F-block licenses, primarily held by bankrupt NextWave Telecom Inc., slated for November. The carrier expects to bid on 40 million to 60 million pops to fill out a nationwide footprint.
“Generally, there is spectrum available in all our present holes, in either NextWave or smaller individual transactions,” said Stanton. “NextWave represents the best way to fill our needs but would require significant cash investments.”
Stanton said VoiceStream expects others to protest its merger with DT. The Federal Communications Commission’s approval is likely to take the longest, about six to nine months, said Stanton. Another legal overhang has to do with legislation Sen. Ernest Hollings (D-S.C.) introduced last month that would prohibit a foreign-government-owned company from controlling a U.S. company. The German government owns about 58 percent of DT today.
A U.S. House of Representatives panel will hold a hearing next month on the issue. European regulators claim the U.S. government’s move would violate U.S. World Trade Organization agreements.
VoiceStream reported a net loss attributable to common shareholders of $419.7 million, or $2.16 a share, compared with a loss of $132.8 million, or $1.39 a share, a year ago. Analysts had expected VoiceStream to record a loss of $1.62 per share.
Net subscribers also were lower than expected because the company delayed the rollout of its “Get More” pricing plans in former Aerial Communications Inc. markets. The company closed its merger with Aerial in May. VoiceStream added 332,500 customers, ending the second quarter with 2.6 million customers. The carrier expects to launch its pricing plans in all of its Omnipoint Corp. and Aerial acquired markets by the end of the year. VoiceStream said it expects to add 450,000 subscribers in the third quarter.
Total revenues reached $453.6 million compared with $109.1 million the previous year.
