Large British high-technology companies have found continental Europe a much tougher market to enter than Europe and the Far East, but the prospects of telecommunications liberalisation in Germany is unlocking the continent for the two major British telecommunications players. Following British Telecommunications Plc’s wide-ranging agreement with Viag AG, Cable & Wireless Plc yesterday confirmed that it had agreed an equally sweeping alliance with electricity generator Veba AG, which will build a stake of up to 10.5% in the UK company by buying in the market. Cable & Wireless will take a 45% stake in Veba’s Vebacom GmbH subsidiary – the price for this has not yet been agreed, and will put its existing continental interests into a 50-50 joint venture called Cable & Wireless Europe, which will operate in all countries of the European Community apart from the UK and Germany, and also in Switzerland. Cable & Wireless says it is prepared to invest up to ú2,000m in continental Europe over the next 10 years. Veba is committed to investing ú2,500m over the same period. The news immediately put 21 pence on the Cable & Wireless share price at 399 pence; Veba is prepared to pay up to 435 pence for up to an initial 5% that it buys in the market, and will review the price ceiling in six months. Final agreement is expected in March. In Germany, Veba has a 28% stake in the E-plus digital cellular consortium and an agreement with the German state railway operator Deutsche Bahn AG to lay telecommunications cables along its wayleaves. In France, it has 15% of the Bouygues SA consortium building the third French cellular network, in which Cable & Wireless is also an investor. And it has a 10% stake in Iridium Inc, Motorola Inc’s consortium to build a global satellite-based mobile telephone network. Cable & Wireless has recognised a potential conflict of interest over its 5% stake in Mannesmann Mobilfunk GmbH, and plans talks with AirTouch Communications Inc and Mannesmann regarding its future. Hermann Kramer, a member of the Veba AG board revealed that the company had initially discussed similar plans with British Telecommunications Plc, but that the British company’s primary goal was that of expanding in Germany, rather than forming a strategic Europe-wide alliance. In any case, Kramer added that Veba would not have been able to afford a significant stake in BT. It views its planned 10.5% stake in Cable & Wireless as both financially and culturally significant. The difference in business culture also accounted for Cable & Wireless’s decision not to take a stake in Veba. Cable & Wireless Europe will manage the existing shareholdings of each partner with a long term objective of reflecting the 50-50 split in the ownership. While fairly straightforward in wholly-owned companies such as Cable & Wireless SA in Spain, it will be less easy where the partners hold minority stakes.
