BT eyes German mobile takeover

UK telecoms giant is poised to buy out remaining 55 per cent of Viag Interkom joint venture
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By David Brierley

By David Brierley

24 October 1999

As German telecommunications giants sweep into Britain, BT is poised for further expansion in Germany.

In a deal worth over £3bn, BT looks poised to take complete control of Viag Interkom, the fourth largest German phone and internet company in which it currently holds a 45 per cent stake.

BT's chairman, Peter Bonfield, claimed last week that his company was "fundamentally" interested in buying out the outstanding stakes in all its European partners.

"We will strengthen our position in Europe wherever possible," he said.

BT's move in Germany continues the rapid and far-reaching consolidation in European telecommunications.

Mannesmann, the German mobile phone operator, unveiled a £18bn bid for Orange last week.

This followed the £8.6bn purchase of One2One by Deutsche Telekom in August and BT's £3.2bn purchase of the outstanding 40 per cent stake in Cellnet, Britain's second-largest mobile telephone operator, from Securicor in July.

Now BT's partners in Viag Interkom also look keen to sell out. Viag, the German utility that holds a 45 per cent stake in Viag Interkom, merged with Veba, the power generation giant last week.

Veba recently sold its holding in E-Plus, a German mobile phone operator, to France Telecom, and Veba/Viag announced on Friday that it would now concentrate on its core businesses of power and chemicals.

Pat Gallagher, president of BT Europe and chairman of Viag Interkom, said that if Veba/Viag pulls out "we will buy the shares".

Meanwhile, Telenor, the Norwegian telecoms group that holds the remaining 10 per cent of Viag Interkom, is in merger talks with Telia, the Swedish group. However, Telenor also indicated that it might wish to strike a deal with BT. Obtaining new licences and creating new telecommunications companies has proved a successful strategy for BT, as Viag Interkom shows.

Viag Interkom was valued at DM15bn (£5bn) earlier this year. However, the soaring prices implied by recent deals suggests that its current value is significantly higher than that. To date, BT has invested £400m in the company.

Viag Interkom is growing rapidly. Its E2 network currently has 480,000 subscribers and expects to attract 800,000 mobile phone and 200,000 internet customers by the end of this year.

Across Europe, BT is growing significantly faster than expected. Sales on the Continent last year reached £4bn, one third higher than predicted.

BT now covers 85 per cent of the European market with telecoms businesses in France, Italy, Spain, Belgium, Switzerland, Sweden and Holland. It is also striving to expand into Poland, Hungary and the Czech Republic as these markets liberalise.

Meanwhile, BT's $10bn (£6bn) joint venture in fixed wire telephony with AT&T has received regulatory approval in Washington and Brussels.

The alliance, with combined sales from fixed wires of $10bn, is to target the $40bn corporate and internet-service-provider market.

The strategic agreement between BT and AT&T foresees the development of joint marketing, purchasing and technology.

Within three to four years, the alliance will be able to offer high-speed data communications and internet access through a mobile phone that can roam around the world. Many observers believe that the agreement between the British and US companies will ultimately lead to an Anglo-American merger.