July 3, 2000
Senate Signals Opposition to Bid
For Sprint by Deutsche Telekom
By JOHN R. WILKE
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- Senate leaders signaled opposition to a possible attempted takeover of Sprint Corp. by German phone giant Deutsche Telekom AG.
In a sternly worded letter sent Friday to Federal Communications Commission Chairman William Kennard, 30 senators called any such bid by a foreign government-owned company "contrary to U.S. law, and inconsistent with our policy to promote competition and maintain a secure communications system for our national security."
The move introduces a new political element to the drama over the future of Sprint, which last year agreed to be acquired by WorldCom Inc. for $129 billion in stock. But the deal has been challenged by U.S. and European antitrust enforcers and is expected to fall apart.
The letter by Democrat Ernest F. Hollings of South Carolina won bipartisan support including Senate Majority Leader Trent Lott of Mississippi and Minority Leader Tom Daschle of South Dakota.
"We are not opposed to foreign investment in U.S. communications forms," the senators wrote. "For example, there was no objections to Vodafone's purchase of AirTouch or France Telecom's holding a noncontrolling 10% interest in Sprint." But they noted that U.S. law bars transfer of FCC licenses to companies that are more than 25%-owned by a foreign government.
In recent years, the FCC has waived some ownership restrictions for World Trade Organization member countries, but the policy hasn't yet been tested by a major U.S. acquisition by a foreign government-owned company.
Mr. Kennard declined to comment on the matter Friday. But an FCC official acknowledged any such deal would get careful scrutiny.
"We're not going to prejudge anything. We would analyze any risk to competition and whether the transaction is in the public interest, just as we would do in any other deal," the official said Saturday.
The lawmakers' letter notes that other WTO-member countries also bar foreign government ownership of telecommunications companies. Italy, Spain and Hong Kong already impose restrictions, and "U.S. regulators should be similarly skeptical," the letter said.
Sen. Hollings last week introduced legislation that would forbid the FCC from waiving U.S. ownership restrictions for companies that are more than 25% government-owned, even if that government belongs to a WTO member. In introducing the bill, Sen. Hollings said that Deutsche Telekom "operates from a protected home market," as do the French and Japanese telephone firms, and that these companies would have an unfair advantage in the U.S. market. He also suggested that European regulators acted to protect the interests of government-owned companies. "Government ownership of commercial assets results in significant marketplace distortion," conferring easy access to capital and favorable interest rates, he said.
Deutsche Telekom, which retains monopoly power in its home market, is 59%-owned by the German government. Its executives have made no secret of their interest in a U.S. acquisition, and the company is believed to be the most likely bidder to step forward with a bid for Sprint, in which it already has a 10% stake. One Deutsche Telekom official, who said Sprint was discussed at a management board meeting of the German company last week, called the situation "a new alternative that we hadn't expected would arise." |
