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Deutsche Telekom

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Chairman Ron Sommer has been quite adept at filling the former state-run monopoly's war chest in recent years. Unfortunately, he hasn't had much of a knack for how or where to spend the company's billions in stockpiled marks.

On Tuesday, Sommer formally announced Telekom's long-anticipated intention to float the company's Internet arm,


. The IPO of 100 million shares is expected to take place in mid-April although Telekom has yet to set a firm date. The value of T-Online has been placed between $15 billion to $20 billion, which will make it the largest European Internet offering ever. DT shares rose 1.61 euros, or 2.5%, to 66.01 euros on the news. As of 1:30 p.m., shares traded in New York were up 2 3/16, or 3.4%, to 66 1/4.

Sommer has earmarked the fair chunk of change that the T-Online float will bring to DT's coffers for expansion both at home and abroad. But many investors will be waiting to see if the chairman can come up with an appropriate target after angering and alienating old partners

France Telecom





in a fumbled merger attempt with

Telecom Italia


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last year.

That Telekom needs a large international deal to become a major global player has been obvious to almost everyone since long before Sommer's Italian debacle. Many analysts believe DT should have been focusing on a sorely needed North American partner in the first place, in order to give Telekom vital access to the lucrative U.S. market.

"It's a little disappointing, but I suspect they will go for something in France or Italy first," says one German-based analyst, whose asset management firm is very long Telekom. "I think a deal in the States still looks quite a ways off." He noted the fact that the German government still owns a large stake of DT as a major deterrent to a merger of equals with any prospective U.S. partner.

Whether Telekom's next move is a grab for wireless assets in France or Italy is impossible to guess at the moment, but Sommer can be pretty assured of a successful flotation of T-Online. With over 4.2 million subscribers, T-Online is Europe's largest Internet service provider, even topping

America Online


and Bertelsmann's joint venture AOL Europe. Its IPO will easily eclipse the highly successful float of

Terra Networks


, which raised some $800 million for its parent telecom


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of Spain last fall. DT also said it will retain majority control of T-Online and named

Dresdner Kleinwort Benson


Goldman Sachs

as lead managers for the IPO.

A similar float by domestic telephony rival


of its online operations

has made its investors a killing, as the stock soared 276% in the fourth quarter of 1999. T-Online's position as Europe's leading ISP could make those gains look laughable.

"T-Online continues to possess a stranglehold on the German market. Its reach, at close to 70%, is phenomenal

and is twice as high as that of the" next closest competitor, according to

Merrill Lynch's

latest quarterly Internet survey.

And T-Online is only half the picture. Telekom also said Tuesday it would likely float its wireless operations unit


this autumn. Although it has slipped to No. 2 behind



mobile outfit domestically, Telekom still stands to see another huge influx of cash from that IPO as well.

Ironically, while the funds from separate floatations of T-Online and T-Mobil could allow Telekom to finally gain a foothold in the U.S., it's the cooperation between the two units that could bring huge windfalls domestically as well. Although Europe may still lag behind the U.S. in PC Internet usage, the coming ascendancy of wireless-based Internet applications is expected to heavily favor Europe and its deeper penetration of mobile phones.

That's all very good news for Telekom's bulging war chest. Except for the fact Chairman Sommer will still have to find the right place to spend it all.