announcement Tuesday that it has begun the long-anticipated sale of its cable network will likely hasten some of the broadband voice and Internet competition that the former state-run monopoly has been dreading.
However, the gobs of cash Deutsche Telekom stands to rake in over the coming months -- from the sale of its cable network as well as the flotation of its Internet and wireless units
-- may very well provide DT Chairman Ron Sommer with a big enough war chest to transform Deutsche Telekom into a global player.
Morphing from the stodgy telco it is today into a world name might assuage the fears of some investors, who worry that Tuesday's sale of DT's largest nationwide cable network represents a threat to its revenue. U.S.-based
Callahan Associates International
bought 55% of DT's North Rhine-Westphalia network for an estimated $2.5 billion. In total, Sommer reckons the sale of the nine regional cable networks will raise more than $15 billion for DT. Deals for five more of the units are expected by March.
The deal alone did little to spark investor enthusiasm. Deutsche Telekom closed down 1.90 euros, or 2.2%, to 85.59. Shares traded in New York, however, rose 1 7/8, or 2.2%, to 86 5/8 as of 4 p.m. EST.
With Deutsche Telekom's asphyxiating grip on 18 million homes in Germany's cable network loosening and the development of broadband gathering pace, the company may quickly look to put the money from the sale to use in a big acquisition. Current speculation has Deutsche Telekom as a possible hostile bidder for
examined this issue
In the process, supporters of broadband cable may finally see data and such services come to Germany, as companies like Callahan spend cash for the necessary upgrades to the cable. Deutsche Telekom, loath to lose Internet and telephony customers to a cable network it used to own, will maintain minority stakes in each regional operator, allowing it to veto management decisions.
Deutsche Telekom's foot-dragging on cable has helped further the hopes of other broadband data services that circumvent telecommunications companies entirely.
discussed the plans of German utilities to use their electricity grids for voice and Internet data transfer. One such electric company,
, announced Tuesday that it was accelerating its broadband power line project.
Regardless of Deutsche Telekom lurking in the background, the sale does improve the prospects for broadband cable in Germany. The outdated network certainly wasn't going to be upgraded to high-speed data transfer standards by Deutsche Telekom alone. With new owners and extra cash, the process should be sped up and, at the end of the day, very likely at Deutsche Telekom's expense.
"They are trying to keep all their options open by holding onto the minority stake, but ultimately with the sale of the jewel of the crown of the regional cable operators done, competition for
Deutsche Telekom will develop more quickly now," says Doug Wight, an analyst for
in London. Wight still rates the stock a buy. Commerz has no investment banking relationship with DT.
Deutsche Telekom certainly won't relish losing voice or Internet customers to the cable rivals, of course, but should the funds from the cable network's sale help facilitate an expensive acquisition and make DT a global telecommunications player, Sommer will probably be willing to tolerate a little local broadband competition.