WASHINGTON-The European Union warned the United States not to block Deutsche Telekom AG’s planned purchase of VoiceStream Wireless Corp., threatening a transAtlantic trade fight if federal regulators give into objections raised by Sen. Ernest Hollings (D-S.C.) and others.
“The European Community and its member states reserve their rights under the WTO (World Trade Organization) to challenge any actions by the FCC that are not compatible with the WTO obligations of the United States,” the EU told the State Department in written correspondence also received by the Federal Communications Commission.
The EU takes issue with Hollings’ view, expressed in comments on the proposed transfer of wireless licenses from VoiceStream Wireless to DT, that the acquisition would violate a U.S. law limiting firms more than 25-percent owed by foreign governments from acquiring American wireless companies.
“That interpretation is directly contrary to the U.S. Schedule of Commitments and would impose a restriction on market access not contained in the U.S. commitments,” the EU stated.
The German government owns 44 percent of DT, but the government has vowed to dilute its interest in the telecom giant in coming years. Even so, the FCC has the prerogative to waive the 25-percent rule under its public-interest powers.
Last year, Hollings and others pushed legislation designed to kill the DT- VoiceStream deal. While Hollings eventually lost support among his colleagues and the legislation died, it took an aggressive lobbying campaign by DT and VoiceStream to take the Hollings bill out of play.
Hollings, who could not be reached for comment on the EU letter, argued American firms in the deregulated U.S. telecom industry should not have to compete with large foreign firms subsidized by governments. In addition, national security concerns were raised. The latter issues currently are being considered by an inter-agency group headed by the Treasury Department.
The EU said Hollings’ interpretation of the law is contrary to a 1997 global trade agreement signed by the United States and others covering 95 percent of the world’s telecommunications services.
The VoiceStream-DT transaction, originally valued at $52 billion, has dropped 20 percent in value because of sagging DT stock prices.
That the EU chose to send such a strongly worded letter to the U.S. government just as President Bush appointed a pro-deregulation chairman to the FCC is unclear. The transfer of VoiceStream Wireless’ licensees to DT appeared on track to be approved by former FCC Chairman William Kennard. The deal stands even a better chance under new FCC Chairman Michael Powell.
The EU and U.S. also have sparred over third-generation mobile-phone standards and other items.
