BERLIN -- It was one small step for
and one giant leap for its chairman, Ron Sommer.
Long frustrated in his pursuit to secure a blockbuster merger, Sommer announced Monday that Deutsche Telekom had purchased 50.1% of
information technology unit
, which suggests that the company will be expanding in smaller steps.
Concurrent with the Debis deal, Deutsche Telekom is reportedly toying with the idea of forming itself into a holding company with four separate divisions, each with a considerable amount of autonomy and its own listing on the stock market. All the commotion helped Deutsche Telekom stock to climb 5.01 euros, or 5.8%, to 91.60 ($88.42) on Tuesday.
While the so-called "four pillars" strategy for the telecom giant is nothing new, the idea of forming a holding company, with majority stakes in the four divisions, is. Besides IT, the other three areas include wireless telecommunications, traditional telephony operations and Internet and online services. Two of them, the Internet and wireless units known as
, have already been hived off and will go public next month and during this fall, respectively.
After failing to merge with
last spring and being scared off a deal with
earlier this year, Deutsche Telekom found that a global telecom solution remained elusive.
Despite having a large war chest with which to splurge on acquisitions, Sommer has not been able to lock down a deal that would keep Deutsche Telekom from becoming anything other than a bit player in the ever-more competitive and consolidating telecommunications industry.
Should Deutsche Telekom choose to form itself into four strong and independent units under a holding company, it might be able to aggressively pursue some sizable acquisitions, ultimately leading to what Sommer had hoped to achieve with a massive one-off merger.
But don't suppose this strategy would come much more cheaply than one large deal.
Certainly Deutsche Telekom's IT unit
will be greatly strengthened by the absorption of Debis. According to Theo Kitz, an analyst for
Merck Finck & Co.
in Munich, "the new company's focus will remain on Germany and Europe,
but Debis Systemhaus should do much to globalize DeTe System as it employs 17,000 people across 22 countries." Merck Finck & Co. doesn't have an investment banking relationship with the company.
However, the price tag for the Debis deal is estimated at around $5.5 billion, and Deutsche Telekom is expected to take over DaimlerChrysler's remaining stake a few years down the road, once the current government likely enacts beneficial changes to the German corporate tax code.
And the deal is unlikely to be the last purchase for Deutsche Telekom's IT operations. During a televised press conference Monday, Sommer said acquiring Debis was "an important step, but it certainly won't be the last one." And already there are reports that U.S. IT firm
might be next on Deutsche Telekom's takeover list.
Of course, for a chairman of a multinational company, there's nothing like a huge acquisition to get the heart racing, and Sommer hinted that he has still not given up on the idea of a large-scale merger. He noted that Deutsche Telekom might yet have the capacity to "surprise" a few people in the not-so-distant future.
Unfortunately, until now, the biggest surprise Sommer has sprung on the investment community has been his inability to close a major deal.