Deutsche Telekom sets sights on major expansion

Deutsche Telekom AG said yesterday its acquisition of the smallest of Britain's four mobile telephone companies, One2One, was a stepping stone in building a global empire.

Chief executive Mr Ron Sommer told a news conference that Europe's biggest telecoms group aimed to create a new share "currency" to fund further deals.

Deutsche Telecom ended weeks of speculation on Friday by announcing that it was buying One2One for £6.9 billion sterling in cash and shareholder loans and £1.5 billion in debt.

The group, which earlier this year saw an ambitious acquisition of Telecom Italia collapse, said it saw no reason why it should not pursue other large mergers.

Deutsche - which is also considering spinning off its online unit T-Online - said it would retain a majority shareholding after any listing.

The acquisition of One2One from joint owners Cable and Wireless plc of Britain and MediaOne International of the US marks the German company's first concrete step towards becoming a global telecommunications concern.

Mr Sommer has been keen to break out of an increasingly competitive home market.

He said Deutsche Telekom, which owns a 10 per cent shareholding in US long distance carrier Sprint Corp, would need an equal footing in the United States and Europe to become a genuine global player.

Mr Sommer said he remained hungry to build mobile operations further in Europe.

Mr Sommer said the company's biggest overseas acquisition to date offered potential for "wide ranging" synergies, although he gave few details.

However, the deal is expected to be earnings neutral by 2003 at the latest and Deutsche Telekom's dividend will not be affected by the purchase, which creates goodwill of £7.3 billion.

One2One has been mainly a consumer-orientated business and has traditionally been seen as lagging its three rivals Vodafone AirTouch Plc, BT Cellnet and Orange plc.

However, Deutsche Telekom, which aims to boost One2One's margins to 40 per cent from 16 per cent within three to five years, said it would chase the higher-margin corporate customer segment with dual-band handsets that work over different frequencies.

Analysts have welcomed the acquisition and most view the price paid - which equates to $5,072 per subscriber - as fair.