WASHINGTON-Congressional opponents of the proposed $30 billion acquisition of VoiceStream Wireless Corp. by Deutsche Telekom AG have struck again, just weeks after VoiceStream was successful in getting members of its congressional delegation to urge support for the deal.
“In recent days, a series of comments from German government officials have demonstrated, beyond a reasonable doubt, that the German government continues to exert operational control of DT. … German Chancellor Gerhard Schroeder congratulated [DT Chairman Ron] Somner in `setting up the company well both domestically and abroad’ and noted that the DT share price was `undervalued.’ [Such statements] traditionally are issued by private-sector board members, not government officials,” said Sen. Ernest F. Hollings (D-S.C.), ranking member of the Senate Commerce Committee and Rep. John D. Dingell (D-Mich.), ranking member of the House Commerce Committee.
Hollings has been leading the charge against the DT/VoiceStream union because DT is 55-percent owned by the German government, even though that ownership percentage is and will continue to decrease over time. Federal law limits overseas firms more than 25-percent owned by foreign governments from acquiring U.S. communications licenses. However, the Federal Communications Commission has the discretion to waive the 25-percent rule under its public-interest powers.
“Sen. Hollings and I communicated yesterday on this matter of foreign-government competition,” said Dingell to the United States Telecom Association’s National Issues Conference.
The Washington lawmakers said in a Feb. 16 letter that the proposed merger would foster wireless competition, consumer choice, innovation and job creation in the United States.
Contrast that with the argument made by Hollings and Dingell in their March 6 letter. “The significant factual record before the FCC … reflects the German government’s significant ownership stake, the large amount of debt backed by the German government, the claimed right to use foreign sovereign immunity, and the large number of government employees working for DT whose status is statutorily and constitutionally protected under German law,” said Hollings and Dingell.
The FCC’s International Bureau, and to a lesser extent, the Wireless Telecommunications Bureau, are working on the VoiceStream-DT deal. The Department of Justice gave it antitrust clearance last September; the same month the companies asked the FCC to transfer VoiceStream’s communications licenses. The companies have entered a national-security agreement with the Justice Department and the FBI. The two firms agreed to condition the license transfer on compliance with the DoJ/FBI agreement. The Committee on Foreign Investment of the United States, an interagency group led by the Department of the Treasury, must also give its OK based on national-security considerations. Voice Stream shareholders are expected to approve the merger at a special meeting tomorrow.
Under the terms of the Voice Stream-DT merger agreement, either side can walk away from the deal-or simply decide to renegotiate it-if the proposed merger is not completed by early summer.
Dingell told the USTA audience that the German government’s ownership of DT could be similar to what some local and state governments are currently attempting in the local exchange market. Although he said he does not know the facts of the local-state government situation, government ownership could give one competitor an advantage over another.
“It is my view we should have some hearings on government competition in this area,” said Dingell.
Those hearings may happen, but it is unclear when. “We may do that. We have a number of hearings already scheduled so it would be after that,” said Rep. Fred Upton (R-Mich.), chairman of the House telecommunications subcommittee.
A spokesman for Rep. Billy Tauzin (R-La.), chairman of the House Commerce Committee, said that Tauzin has not spoken with Upton to set this year’s telecommunications agenda.
