Preopen Trading: VoiceStream Leaps in Early Action; Futures Negative
(Updated from 7:22 a.m. EDT)
VoiceStream Wireless
(VSTR)
was ringing off the hook this morning, on news of its potential acquisition by
Deutsche Telekom
(DT) - Get Report
. Shares of VoiceStream were lately up 15 1/16 to 140 in early action, according to
Instinet
. The stock last traded at 142.875 on
Island
, which uses decimal pricing.
Deutsche Telekom is in serious talks to acquire VoiceStream Wireless,
The Wall Street Journal
reported, in a deal that could be valued at significantly more than $40 billion. DT's interest in VoiceStream could prompt Japan's wireless giant
NTT DoCoMo
to step up its efforts to buy VoiceStream, the
Journal
said. In the past few months, NTT DoCoMo has discussed to acquire a stake in VoiceStream, the
Journal
said, citing news reports.
The German telecom giant's bid comes as the company is considering a bid for
Sprint
. Deutsche is also said to be considering a bid for
Qwest Communications
(Q)
.
German stock markets fell today on concerns that Deutsche Telekom's takeover attempt could be too costly. Germany's
Xetra Dax
was down 0.6%. After midsession, France's
CAC 40
was down 0.4% while the U.K.'s
FTSE 100
up 0.5% (see today's
European Midday Update for more). Japan's
Nikkei 225
lost 0.4% overnight, while Hong Kong's
Hang Seng
rose 0.7% (see today's
Asian Markets Update for more).
The
S&P 500 futures on
Globex
lately were down 3 to 1488.5, more than 2 points below
fair value as calculated by
Prudential Securities
. The thinly traded
Nasdaq 100
futures were off 1.7 to 3811.
Earlier: VoiceStream Sizzles on Deal Speculation
LONDON -- Reports that
Deutsche Telekom
(DT) - Get Report
has made overtures to
VoiceStream Wireless
(VSTR)
could leave
Sprint
standing alone when the music stops in the latest round of telecom musical chairs.
It is widely believed that Deutsche Telekom's acquisitive ambitions wouldn't end with a purchase of VoiceStream, a nationwide wireless phone carrier, and that the company would go on to pursue additional targets. Sprint, which is facing opposition from the
Justice Department
in its attempted merger with
WorldCom
(WCOM)
, has been considered a likely partner for the German telecommunications company that is seeking a U.S. partner.
However, a purchase of VoiceStream would make Sprint a less likely partner for Deutsche Telekom, argued Martijn de Bruin, an equity salesman with
Banc of America Securities
in London, for the simple reason that the technologies of the two companies are incompatible.
VoiceStream uses global system for mobile communications, or GSM, which is the standard in Europe. In buying Sprint, Deutsche Telekom would also be buying Sprint PCS, the company's mobile arm, which operates on a different network that isn't compatible with GSM.
"The technologies don't mix," de Bruin said. "Your wireless assets don't combine."
Instead, de Bruin argues that
Qwest Communications
(Q)
would be a more suitable addition to a Deutsche-VoiceStream menage since its wireless network is compatible with VoiceStream's. Talks between Deutsche Telekom and Qwest broke down earlier this year as Qwest was in the midst of completing and acquisition of
U S West
.
More importantly, buying Qwest would solve a problem for Deutsche Telekom in its own backyard. Qwest has teamed with Dutch telecom operator
KPN
in a joint venture that at the end of this month will inaugurate several new networks linking major German cities.
"For Deutsche Telekom, Qwest-KPN is its main competitor in the German market," de Bruin said. "If they bought Qwest, the main competitor disappears."
Shares of VoiceStream traded in Germany jumped 13.15 euros, or 9.8%, to 147.50 euros ($140.70); while Deutsche Telekom shares declined 2.14 euros, or 3.5%, to 59.40 euros. Sprint was dipped 1.80 euros, or 3.2%, to 53.70 euros, and Qwest declined 50 European cents, or 0.9%, to 56.50. WorldCom was off 1.50 euros, or 3.1%, to 47 euros. (Like many U.S. companies, these shares are also listed on some foreign exchanges.)
Of course, Deutsche Telekom's efforts to purchase any U.S. company could run into serious barriers. Certain U.S. senators say they would oppose such a deal as it would violate a
Federal Communications Commission
regulation that prevents the transfer of radio licenses to companies that are more than 25% owned by foreign governments. Deutsche Telekom, once a German state-owned monopoly, has been privatized, although the government still owns more than 50% of its shares.
More broadly, the markets will be focusing on the earnings of several U.S. companies, including
Yahoo!
(YHOO)
, which, according to analysts polled by
First Call/Thomson Financial
, is expected to earn 10 cents a share for its second quarter, compared with 5 cents a year earlier. Yahoo! shares changed hands down 2 euros, or 1.72%, to 114 euros.
At 7 a.m. EDT, the September
S&P 500 futures were down 1.4 points, or 1.68 points below
fair value, which was little indication for the open. The
Nasdaq 100
futures were 12 points lower to 3816, also little indication for large-cap tech stocks in the early going. Fair value helps determine the tone of futures trading, often a good indication for how the securities market will open.
