February 15, 2001, 10:59 AM — DEUTSCHE TELEKOM IS denying a report that its planned takeover of U.S. mobile telecommunications operator VoiceStream Wireless is to be delayed.
"That isn't so," said spokesman Hans Ehnert on Friday. "How can a deadline be postponed that never existed?"
Friday's The New York Times cited "executives close to the companies" as saying that the parties to the deal have quietly added a clause putting off the completion of the acquisition, which was originally expected by late April, until late May or early June. The delay, until after Deutsche Telekom's annual shareholder meeting in May, would spare the German corporation from paying hundreds of millions of dollars in cash dividends to VoiceStream shareholders.
But Ehnert insisted the merger is on schedule.
"We've signed a contract that we're working quickly to close," he said, adding that the companies had agreed that the closing would take place, assuming regulatory approval, after May 31. "We always said we expected approval in the first half of 2001, and then the closing can take place."
The remaining regulatory obstacles to the merger are likely to be cleared soon, with approval from the U.S. Federal Communications Commission and Securities and Exchange Commission expected within weeks.
Ehnert confirmed the existence of a clause granting VoiceStream shareholders a dividend in the form of 0.0075 new VoiceStream shares for each share they already hold, in place of a cash dividend. VoiceStream stock will later be convertible into Deutsche Telekom stock, assuming the deal goes through.
The New York Times said the payout is worth about half the cash dividend that Deutsche Telekom shareholders will get, though still an unexpected windfall for investors in the U.S. company. But VoiceStream management and shareholders are worried that the value of Deutsche Telekom's stock might fall even further, the paper said.
The deal, announced last July, offered $30 and 3.2 Deutsche Telekom shares for each VoiceStream share -- for a total valued at the time at more than $50.7 billion. But with the decline in Deutsche Telekom's stock price, the deal is now worth less than $30 billion, the paper said.
"The deal has not been totally officially consummated, so DT [Deutsche Telekom] are in good rights not to pay dividends," said telecommunications analyst Bernd Ostergaard of Giga Information Group in Denmark. "Obviously DT is very worried about its ability to pay its commitments . . . in view of the fall in Orange valuations."
France Télécom announced Wednesday it would cut the initial public offering price of Orange, its mobile telecommunications subsidiary, by some 10 billion euros ($9.2 billion), raising the specter of continued deflating values in the telecommunications sector.