WASHINGTON-Deutsche Telekom AG, after announcing its intent to buy VoiceStream Wireless Corp. , spent last week trying to kill an appropriations bill rider that could kill the deal and others like it involving purchases of U.S. telecom firms by companies majority owned by foreign governments.
The Senate late last week had not scheduled a vote on the Commerce, Justice, State appropriations bill. As such, it appears likely the Senate will take up the matter after it returns from the August recess.
The Senate appropriations bill includes an amendment, penned by Sen. Ernest Hollings (D-S.C.), that would restrict the Federal Communications Commission from approving acquisitions of U.S. telecom firms by foreign telecom carriers that are more than 25 percent held by the government.
Hollings and 29 other senators-Democrats and Republicans alike-have written to Federal Communications Commission Chairman William Kennard to urge the agency not to approve mergers involving telecom firms heavily controlled by foreign governments. The lawmakers claim such mergers raise national security questions and are unfair to U.S. telecom carriers, which-unlike major telecom firms in Germany, France and Japan-do not enjoy government subsidization.
Kennard pledged to Hollings to carefully scrutinize takeovers of American telecom companies by foreign telecom firms more than 25 percent owned by foreign governments.
The Clinton administration said the Hollings legislation is unnecessary, noting there are various processes to examine such mergers. The White House, for unrelated reasons, has threatened to veto the Commerce appropriations bill.
Current law already bans U.S. telecom carriers from being bought by overseas firms that are more than 25 percent government owned. But the FCC has leeway to waive that rule if it determines the merger is in the public interest. Moreover, consideration may be given to foreign telecom firms if they are World Trade Organization members.
The Hollings initiative was a stand-alone bill until it got attached to the Senate appropriations bill two weeks ago. A similar measure, sponsored by Reps. John Dingell (D-Mich.) and Edward Markey (D-Mass.), was recently introduced in the House.
Despite strong Senate support for the Hollings legislation, there are signs that an effective lobbying effort has taken hold to thwart the measure.
Deutsche Telekom has acquired the services of Washington, D.C. law firm Wilmer, Cutler and Pickering to do its bidding on Capitol Hill. VoiceStream, meanwhile, is relying on seasoned lobbyists at Cassidy & Associates Inc.
Opposition to Hollings’ legislation is coming from an eclectic mix of entities, including two unlikely bedfellows. Perhaps the most surprising opponent to the Hollings amendment is organized labor.
“It would be a travesty for members of the Democratic Party to support this position if it becomes a bill and/or is attached to an appropriations bill. No company should be prohibited from bidding solely because it is partially owned by the government,” said Morton Bahr, president of the Communications Workers of America, in a letter to lawmakers.
Bahr, noting the Hollings measure follows the U.S. and European Union rejection of the MCI WorldCom Inc.-Sprint Corp. merger, said the legislation “solely serves the interests of [Chairman] Bernie Ebbers of MCI WorldCom who is extremely close to Senator [Trent] Lott, as well as Sprint’s [Chairman William] Esrey and AT&T [Corp.’s Chairman Michael] Armstrong.”
Bahr said Deutsche Telekom has been a good employer in Germany.
Thomas Donahue, president of the U.S. Chamber of Commerce, cautioned lawmakers in a July 20 letter that Hollings’ legislation “could have the unintended consequences of hindering investment in small telecommunications entities whose survival may depend on the ability to secure foreign investment.”
Senate Commerce Committee Chairman John McCain (R-Ariz.) and Rep. Michael Oxley (R-Ohio), a high ranking member of the House Commerce Committee, have voiced opposition against the Hollings measure as well.
The Hollings legislation also has drawn howls from overseas.
The European Commission’s Pascal Lamy, in July 24 letters to U.S. Trade Representative Charlene Barshefsky, Secretary of State Madeleine Albright, Commerce Secretary Norman Maneta and FCC Chairman Kennard, called the Hollings legislation “wholly unjustified.”
“We have to avoid a very damaging trade fight in this highly important sector,” Lamy stated.
Reuters, citing a Kyodo news agency story, reported that Japan’s Posts and Telecommunications Minister Kozo Hirabayashi had written the USTR’s Barshefsky “to express concern to the United States because it sees it as highly likely that [the legislation] infringes on…free market access.”
The Hollings legislation would nix Nippon Telegraph and Telegraph’s proposed $5.5 billion purchase of Verio Inc., a Colorado Internet firm.
