VoiceStream to buy Powertel

VoiceStream Wireless Corp.(Nasdaq: VSTR) said late Sunday it would buy Powertel Inc. (Nasdaq: PTEL) in a deal to expand its all digital GSM wireless coverage in the Southeastern United States.

Deutsche Telekom AG (NYSE: DT), which had already agreed to buy VoiceStream, also has a deal with Powertel, which gives its shares a value of about $105.36.

Powertel shares closed at 86 5/8 Friday. Shares in VoiceStream which ="http: www.zdii.com="" industry_list.asp?mode="news&doc_id=ZE505160&pic=Y&ticker="">posted a wider-than-expected loss in its second quarter recently, closed at 118 3/16.

Powertel owns wireless licenses covering 25 million people (POPs) and operates a GSM network spanning 12 states in the Southeastern United States, in areas where VoiceStream does not have services. As of June 30, Powertel had about 727,000 customers, year-to-date total revenue of $212.3 million and positive operating cash flow for the last two quarters.

Under complicated terms of the VoiceStream/Powertel merger agreement, Powertel shareholders will receive VoiceStream common shares at a conversion ratio ranging from .65 if the average closing price of VoiceStream common stock is $130.77 or above and .75 if the average closing price is $113.33 or below.

Between these two points the ratio adjusts to yield $85 in VoiceStream stock for each share of Powertel. The average closing price of VoiceStream common stock will be based on an average of 10 randomly selected trading days during the 20 day period ending 5 trading days prior to the closing.

Deutsche Telekom's acquisition of VoiceStream has resulted in another series of agreements: Deutsche Telekom and Powertel have entered into a separate agreement for Deutsche Telekom to acquire Powertel and for the Powertel shareholders to receive 2.6353 Deutsche Telekom shares for each share of Powertel.

Based on the closing price of the Deutsche Telekom ordinary shares on the Frankfurt Stock Exchange on August 25, the equivalent of US $39.98, each share of Powertel common stock would have a potential value of US $105.36.

The VoiceStream/Powertel merger will not close if the Deutsche Telekom/VoiceStream merger is consummated. Thus, Powertel shareholders will receive Deutsche Telekom shares unless the merger between VoiceStream and Deutsche Telekom is terminated. The transaction structure was designed to provide U.S. tax deferred treatment to Powertel shareholders.

There are about 55.9 million outstanding Powertel shares on a fully diluted basis. Based on this number, Deutsche Telekom would issue up to 147.3 million new shares. About $1.2 billion in Powertel debt will be assumed.