The German government has promised Washington that it will sell its stake in Deutsche Telekom.
According to a report in the FT, a foreign policy adviser to the German Chancellor has written to President Clinton’s national security adviser, asserting that the German government was committed to selling off its stake. The letter suggests that German officials are worried that the proposed $45 billion merger between DT and VoiceStream could be blocked.
VoiceStream is important to DT a perfect base from which to build its US presence. While VoiceStream may not be the biggest mobile telecoms company (it only has 2% of the US mobile subscriber market), DT should be able to use it as a base to which it can migrate proven and successful applications and business models from Europe. DT would then be in a serious position to compete with Vodafone on a global scale.
But US law prevents a company that is more than 25% owned by a foreign government from buying a US phone license. Regulators can waive the restriction, but if the Hollings bill were passed in Congress, waiver authority would be stripped from US regulators and given to the government.
Essentially Hollings and other US senators are concerned that foreign, state-owned companies are going to come over to the US, and buy up completely free market-adhering US companies, while at the same time not wanting to have their existing powers overridden by US government intervention. Moreover, this concern is not a bad thing. The US wants to force the likes of NTT and DT to give assurances that they will adhere to the rules of free competition. The German government’s decision is therefore political rather than economic. VoiceStream is so important to DT’s strategy, that it cannot lose it at any cost.
