German phone giant Deutsche Telekom appears ready to test the international communications waters again, just six weeks since its Global One joint venture dissolved.
Deutsche Telekom today is rumored to have made a substantial bid
to buy U.S.-based carriers Qwest Communications International and US West,
after several days of scuttlebutt
concerning a deal.
Qwest has already said it is in talks
with suitors, but company representatives today declined to comment on the
reports of a specific offer.
A deal would give Deutsche Telekom, one of Europe's largest communications
companies, the significant U.S. presence it is lacking. Analysts say the
moves--if they come to fruition--are made all the more necessary by the
recent end of Global One, the three-way international joint venture between
Deutsche Telekom, France Telecom and Sprint that crumbled in January.
But the acquisition interest also is a reflection of the need for breadth in
the increasingly global communications market, which has seen a handful of
multibillion dollar mergers
over the past year.
"They want to be a global player. It's not just about breaking into the
U.S. market," said
Courtney Munroe, a communications industry analyst at International Data
Corp., a market research firm.
The telecommunications merger scramble has been precipitated by falling
profits in the traditional local and long-distance voice business. Dozens of companies are looking for new Internet-based technologies to deliver a
wider variety of services and a larger customer base to buy them.
The merger marriages provide entrenched competitors such as Deutsche
Telekom with new
state-of-the-art networks and technologies, while allowing the upstarts to
gain access to the large customer bases, marketing and sales know-how of
their older competitors. The merger mania has escalated over the past year
as companies fear being left without a partner.
If and when last year's combination of MCI WorldCom and Sprint is approved, the combinations
will provide a worthy global adversary to AT&T and a slew of international
players, raising the stakes of the telecommunications game.
Europe and Asia represent the largest growth markets for
communications services, according to experts. But Deutsche Telekom already
has cornered a
significant portion of the European market, making U.S. expansion an obvious
target for the carrier.
"DT, while formidable in one area of the globe, is still a minnow in the
scheme of things," said Jeff Kagan, an independent telecommunications
analyst. "They don't want to be left without a seat when the music stops."
Analysts say communications company executives believe they must continue to grow, because future telecommunications survivors will be several times
larger than today's carriers.
"The future DT sees is that worldwide communications companies will be worth hundreds of billions of dollars. So in that world everyone is still just a minnow. We're just in the beginning of that change," Kagan said.
Analysts said the end of the Global One alliance forced Deutsche Telekom's
hand, sending the carrier scrambling for a dance partner. The company had
expressed interest in Sprint, prior to that company's merger with MCI
WorldCom, and Global Crossing also has been rumored as a potential partner.
"I think the end of the Global One partnership put a lot more pressure on
(Deutsche Telekom) to do a deal," said Elliott Hamilton, senior vice
communications market research firm the Strategis Group.