VoiceStream Up Again on Talk of Hefty Bid
VoiceStream Wireless Corp. shares rose 17% amid speculation that the U.S. mobile-phone company will be purchased by Deutsche Telekom for as much as $53 billion, or $205.60 a share.
“It’s a great price,” said Kevin Roe, an analyst at ABN Amro, who has a “buy” rating on VoiceStream.
Shares of the Bellevue, Wash.-based VoiceStream rose $24.50, to $170 in trading after the close of the New York Stock Exchange. The stock had risen 94 cents, to $145.50, earlier in the day, and has gained more than 16% since the Financial Times said last week that Deutsche Telekom had offered to buy the company.
Deutsche Telekom bid $53 billion for VoiceStream, offering 3.2 of its shares plus $30 in cash for each VoiceStream share, or $205.60, Dow Jones Newswire reported, citing people familiar with the matter. VoiceStream has not yet accepted the offer, Dow Jones said.
“VoiceStream is in the driver’s seat and will take their time,” Roe said.
Earlier Wednesday, the Financial Times said Deutsche Telekom’s supervisory board was likely to approve a plan to pay $43 billion for VoiceStream. The newspaper, without citing sources, said Deutsche Telekom will offer at least $150 per VoiceStream share, valuing the mobile phone service’s fully diluted share capital at $38 billion. Deutsche Telekom would also assume $5 billion in debt.
Deutsche Telekom and VoiceStream declined to comment. Europe’s biggest phone company, which has said expansion in the U.S. is its top priority, also may be interested in Qwest Communications International Inc. and Sprint Corp., analysts said. It may face competition for VoiceStream from Japan’s NTT DoCoMo Inc., which is considering a bid, a person familiar with the situation said last week.
“Deutsche Telekom has already said they want to acquire a big American telco, and VoiceStream would be a good wireless business,” said Frank Wellendorf, an analyst at WestLB Panmure in Dusseldorf, Germany, who rates Deutsche Telekom shares “outperform.” “Basically it fits, but the price seems quite high.”
Other analysts have said they believe Deutsche would have an easier time winning U.S. regulatory approval for the purchase of a wireless carrier than for a larger company such as Sprint.
VoiceStream offers mobile phone service in many U.S. markets using the global system for mobile communications, or GSM, the dominant digital wireless standard in Europe and Asia.
The company has nearly 2 million mobile customers, placing it well behind U.S. leaders Verizon Wireless (25 million U.S. customers), AT&T; Wireless (12.5 million) and Sprint PCS (6.5 million). However, that could change because VoiceStream owns licenses--or has partnered to use licenses--to sell service in many major cities where it has not yet finished building its network.
A partnership with Cook Inlet Region Inc., for example, will allow it to serve Los Angeles, San Francisco and Santa Barbara once those mobile networks are completed.
The company, founded in 1994, posted a first-quarter loss, before interest, taxes, depreciation and amortization, of $31.4 million. It had 1.8 million customers at the end of March.
A price of $43 billion would value each customer at about $23,889. That compares with about $5,215 per subscriber that Deutsche Telekom paid last year for One 2 One Ltd., the U.K.’s fourth-biggest mobile phone service company.
VoiceStream, with its backlog of untapped licenses, has more room to grow than One 2 One, however. The company’s potential service area covers about three-quarters of the U.S. population--or more than 200 million people. Britain’s population is 59 million.
Deutsche Telekom’s shares have fallen 16% since early June, as some investors worry that the company will pay too much for an acquisition. On Wednesday, its American depositary receipts fell 81 cents to close at $54.94 on the New York Stock Exchange. News of the bid came after U.S. markets closed.
“People are worried that [Deutsche Telekom] won’t get a substantial return if it pays that much,” Neil Robson, head of European equities at Baring Asset Management, said last week. “Whatever you do in the telecoms market, you have to pay a big premium.”
Deutsche Telekom has been raising money to fund purchases. It sold $14.5 billion of bonds last month and has shareholders’ permission to issue shares worth about $84 billion for purchases. On Tuesday, it raised $2.5 billion by selling its stake in Italian phone company Wind.
Deutsche Telekom and VoiceStream are still discussing the price of an offer, the FT said. The U.S. company is also talking to other potential bidders, hoping for a higher price, the report added.
