Deutsche Telekom AG’s $35 billion proposal to buy U.S. GSM operators VoiceStream Wireless Corp. and Powertel Inc. has been delayed as DT and VoiceStream are said to be re-negotiating the acquisition price due to DT’s stock slump, according to The New York Times.
In exchange for the delay, which the paper said was to insure DT doesn’t have to pay millions of dollars in cash dividends to VoiceStream shareholders if the deal closes before May, VoiceStream will agree to pay approximately $250 million to its shareholders. The payment is about half of what DT would have had to pay if the deal was not delayed.
“[DT was] long expected to compensate the VoiceStream shareholders with some kind of payment for not getting the dividend,” Karen Egan, an analyst with Lehman Brothers in London, told Reuters.
The deal, originally valued at more than $50 billion before telecom stocks took a slide, would leave DT as the world’s largest GSM operator with solid holdings in Europe and the United States.
The Wall Street Journal reported early last week the U.S. Securities and Exchange Commission was ready to grant its approval of the acquisition. But, even with the SEC’s permission, there remain numerous hurdles the companies must still overcome before the deal is formally approved.
The Federal Communications Commission still must decide whether the deal would harm mobile phone competition. The FCC’s decision was expected later this month, but could be held up due to the new Bush administration and the appointment of new FCC chairman, Michael Powell.
DT said it satisfied a U.S. law enforcement review of its proposed deal last month, which was looking for assurances about the ability to conduct lawfully authorized surveillance of domestic calls and calls originating or ending in the United States.
Another potential stumbling block is VoiceStream’s option to walk away from the deal if DT’s stock price stays below $30.54 per share for seven straight days in the final two weeks of trading on the Frankfurt, Germany, exchange leading up to the purchase date. DT’s shares have hovered around the potential deal-breaking level since the beginning of the year.
If VoiceStream decides to call off the buyout it can keep DT’s $5 billion down payment, though most analysts think VoiceStream would be foolish to walk away from the deal.
VoiceStream said last week its shareholders would vote on the acquisition March 13 and expected the deal to be completed around the middle of the year.
