MAY 28, 1999
HEADLINES -Top Stories
EUROPE
MEXICO TELECOM
FCC Grants Approval to Allocate Additional $1 Billion to Link Schools to the Internet
The Federal Communications Commission has granted approval to allocate an additional $1 billion to bolster the Clinton administration’s effort to link schools and libraries to the Internet. Three of the agency’s five commissioners voted to increase funding to the $2.25 billion cap set by Congress. Although the FCC argue that the increase will not increase consumer phone bills, critics of the measure see it differently. According to a report in The Wall Street Journal, Harold Furchtgott Roth, who is opposed to the program, was quoted as saying "Every billion dollars of direct fees is $10 per household, per year in America." The additional money is targeted to help wire 528,000 classrooms in poor or rural schools to the Internet. It is said that the measure will benefit approximately 40 million students.
SEC Investigates PictureTel’s 1997 Restatement of Earnings
The Securities and Exchange Commission is investigating PictureTel Corp.’s restatement of their 1997 earnings. In November 1997, PictureTel, a videoconference equipment manufacturer, had to restate sales and earnings for 1996 third and fourth quarter earnings and 1997 first quarter earnings because it had booked sale that did not occur. During this time, the company fired one employee and a few weeks later, its two top officers announced plans to resign. However, the company maintains that these events had no correlation with the company’s restatement of earnings. PictureTel leases their products out through resellers some of its systems. When Richard Goldman was appointed as chief financial officer in June 1997, he found minor discrepancies in how much the company was owed from the leases and when the money was expected.
GTE to Sell 187,000 Phone Lines and Alaskan Business to Citizens Utilities Company for $664 Million in Cash
GTE yesterday agreed to sell 187,000 phone lines in Arizona, California and Minnesota to the Citizens Utilities Company for $664 million in cash, as part of a plan to rid itself of slower growing units. The company said it would also sell its Alaskan phone business, which includes about 20,600 phone lines, to the closely held Alaskan Telephone Exchange Acquisition Corp. for an undisclosed amount. Citizens, a Stamford, Connecticut based company that provides phone, electric and gas services in 22 states, said the purchase was part of an effort to expand its businesses to three million phone lines.
Yahoo to Acquire Encompass Inc. for $130 Million
Yahoo Inc. will acquire Encompass Inc., an Internet software developer, for $130 million. With the acquisition, Yahoo can expand the services it offers its strategic partners through its Internet portal. Besides connecting consumers to the Internet, Encompass, based in Atlanta, provides product registration services that companies use to capture demographic information about customers.
EUROPE
Deutsche Bank Acquires TeleColumbus Cable Unit for US$775.2 Million
Deutsche Ban will acquire the TeleColumbus cable-television unit of Germany’s RWE AG and Veba AG for US$775.2 million, and is in the process of searching for other deals in the cable industry. This deal follows the bank’s failed attempt to acquire the cable-television business of Deutsche Telekom earlier this year. TeleColoumbus is Germany’s second largest cable television operator after Deutsche Telekom with 1.7 million subscribers. This deal with RWE and Veba, which is effective on July 1, is part of the bank’s strategy to focus on core electricity generation operations. The bank said that its interest in the cable business is purely financial, and wants to retain its cable investments for three to five years before spinning them off.
Deutsche Telekom to Continue Searching Foreign Mergers
Following the defeat of a failed $81 billion attempted acquisition of Telecom Italia, Deutsche Telekom AG is now scrambling to salvage its global partnership with France Telecom and the Sprint Corporation. Although the company is still suffering from its defeat by Olivetti SpA, Ron Sommer intends to press on with other foreign ventures. One of the problems that face the company now is the broken relationship with France Telecom’s Michel Bon, who was infuriated by the bid for Telecom Italia. In addition, Deutsche Telekom’s main rival Mannesmann AG, which already purchasing a stake in Olivetti’s stake in Italy’s largest cellular phone carrier, announced it will purchase its minority partners in Arcor, the German concern that competes with Deutsche Telekom.
France Telecom and SBC Communications Express Interest in Acquiring Stake of Telekomunikcaja Polska
France Telecom SA and SBC Communications Inc. have expressed great interest in acquiring a stake of 25-35 percent in Poland’s former telecommunications monopoly Telekomunikcaja Polska SA. Deutsche Telekom AG, British Telecommunications PLC, US West, Tele Danmark AS and Belgacom have also expressed interest in the privatization, which should bring in approximately US$4 billion for the Polish government.
British Telecom to Launch Fixed Line Telephone Service in Spain on June 1
BT Espana SA managing director Teofilo del Pozo announced that British Telecommunications PLC will launch its fixed line telephone service in Spain on June 1. Pozo said that BTVox will initially were available indirectly, through dialing the number 1051, and will also offer a long-distance and international call service and a fixed line to mobile service. A provincial call service will be available later in the year. With regard to BTVoz’s tariff structure for Spain, del Pozo said there would be no connection of fixed to mobile calls, which will be by the minute. There will be no minimum call charge; however, there will be a monthly bill of about 2,000 ptas for each subscriber, regardless of the amount of calls made. On the other hand, there will be no initial subscription fee or monthly subscription charge for BTVoz’s services until December 31, when this will be 5,000 and 1,000 ptas respectively.
EU Commission Extends Telenor/Telia Merger Probe
The EU Commission has extended their investigation into Telia’s plans to merge with Telenor, after certain changes were made to the merger proposals. "Certain actions were taken regarding overlapping operations in Norway, Sweden and Ireland," said Ulf Baeckman, Telia’s spokesman for Telenor merger affairs. Further, Baeckman said the Irish operations comprise mobile telephone activities, and certain operations will be sold if merger approval is granted.
MEXICO TELECOM
Telmex Faces Curbs on Rates by Mexican Regulators
Telefonica de Mexico SA would be subject to proposal to restrictions on rate competition under proposed regulations to curb its power as the country’s dominant carrier. Telmex also would be forced to share more information with rivals who pay for use of its vast network. The services the company provides to competitors would have to satisfy minimum standards and, in many cases, fees would have to be based on costs. The government’s proposed regulations is their third big move in recent months to alter a regulatory landscape that was seen to favor the former state monopoly. In December, the government ordered Telmex to cut their network access fees in half and three months later told it to raise long-distance rates. Cofetel was expected to announced the additional regulation within days which are a result of a March 1998 ruling by Mexico’s antitrust authority that Telmex dominated markets for most telecommunications services.
MAY 27, 1999
HEADLINES - Top Stories
ASIA PACIFIC
BRAZIL
CABLE OPTICS
EUROPE
FIBER OPTICS
INTERNET
WIRELESS
CHINA: Special Supplement
FCC Proposes New Measure to Prevent Area Code Shortage
The Federal Communications Commission has proposed a plan to change the way it hands out telephone number to prevent a possible shortage of area codes. During its meeting today, the agency will propose a measure that requires phone companies to return unused numbers. These unused numbers would be thrown into a pool to fulfill new number requests. Also, the agency is considering reducing the blocks of numbers it gives phone companies from 10,000 to 1,000 at a time. The plan raises the possibility of adding extra digits to phone numbers perhaps 10-digit dialing for all local phone calls rather than the seven-digit string used throughout most of the country. However, such a plan would have to be approved by the commission, a process that could take several months. Although the demand for more numbers has increased with the rise of the Internet and wireless services, new phone companies have begun to flock the market. Every time these companies requested additional phone numbers they would
receive a block of 10,000 numbers, regardless if they would use all of them. In most instances, the companies have not used their entire allocation. This figure includes the Baby Bells who using only about one-third of the numbers they have been given.
Charter Communications to Acquire Fanch Communications for $2 Billion
Paul Allen’s cable buying spree has continued as his company announced plans to acquire yet another Cable Company Fanch Communications for $2 billion. With the Fanch acquisition, Allen would gain about 550,000 customers to Charter’s growing cable empire, giving it a total of 5.5 million subscribers. This would raise Charter’s status to the fourth largest cable television Company. At this time however, neither company would disclose the terms of the deal. Those close to the deal said that Charter would pay slightly more than $2 billion for Fanch and assume no debt. Allen’s company will be paying about $4,000 a subscriber, a large amount but still a lot less than the $4600 a subscriber price recently paid by AT&T for MediaOne Group’s cable customers. Yesterday, the company confirmed plans to acquire Falcon Cable for approximately $2 billion in cash and stock, and the assumption of $1.6 billion in debt. In that deal Charter would pay about $3600 for each of Falcon’s subscribers. However,
the lower price in the Falcon deal reflects the necessity to upgrade Falcon’s cable systems to enable two-way interactive services. In contrast, the Fanch systems are more advanced. To continue in his conquest to conquer the cable industry, Allen is considering a public offering of Charter’s stock later this year. This offering would be one of the largest ever to take place in the cable industry.
Tellabs to Acquire Alcatel’s DSC Communications Businesses in Europe for $110 Million in Cash
Tellabs announced that it would acquire Alcatel’s DSC Communications businesses in Europe for $110 million in cash. The European businesses are providers of managed high-speed transport solutions, based SDH and WDM technology. Under the terms of the agreement, Tellabs will acquire their research, development and manufacturing resources. It is anticipated that the effect on earnings per share will be approximately a penny dilutive in 1999, with a slight accretion in the year 2000. The agreement covers the European businesses in Copenhagen, Denmark, and Drogheda, Ireland Tellabs also is acquiring sales and support offices in England, India and Poland, and an interest in FIBCOM India Ltd., a joint venture in India. As part of the agreement, Tellabs and Alcatel will enter into a technology cross-licensing arrangement.
ASIA PACIFIC
NTT’s Fiscal Year Profit Rose 108 Percent
Nippon Telegraph and Telephone of Japan reported that its profit more than doubled during the past business year. NTT’s consolidated net income rose 108 percent to 602.9 billion yen (US$4.92 billion) in the year ended March 31, NTT, which is vying with Cable and Wireless of Britain for control of Japanese long-distance carrier International Digital Communications, said revenue rose to 9.73 trillion yen. Despite the strong performance, NTT expects a group net loss this fiscal year of 133 billion yen, on sales of 10.24 trillion yen. In July, NTT will turn itself into a holding company and split its business operations in two regional carriers and a long-distance carrier.
BRAZIL
Cardoso Claims he never tried to Influence Telebras Selloff
President Fernando Henrique Cardoso at no time tried to influence the outcome of last July’s privatization of Telecommunicacoes Brasileiras SA, said Communications Minister and government spokesman Joao Pimenta da Veiga. In the first official response to newspaper allegations that Cardoso allowed his name to be used to influence the Telebras bidding process, Pimenta da Veiga told a news conference that the president never pressured local companies to join a consortium participating in the selloff.
CABLE OPTICS
Comcast Corporation and Jones Intercable Announce Cable System Swaps with Adelphia Communications
Comcast Corp. and Jones Intercable Inc. have announced agreements to swap certain cable systems with Adelphia Communications. These cable system swaps will continue to strengthen Comcast’s Mid-Atlantic super-cluster, encompassing cable systems in New Jersey, eastern Pennsylvania, Maryland, Delaware, Washington DC and Virginia. These system swaps, together with other pending acquisitions and investments, will make Comcast’s Mid-Atlantic super-cluster one of the largest cable system clusters in the nation with interests in more than four million owned and managed cable subscribers. In addition, they will enhance Comcast and Jones’ cable clusters in the Midwest, in Michigan and Indiana, and also in West Florida. In the aggregate, these swaps will add approximately 464,000 cable subscribers currently held by Adelphia to Comcast and Jones markets. In exchange, Adelphia will receive current Comcast and Jones systems serving approximately 440,00 subscribers in the greater Los Angeles area as
well as in Palm Beach, FL The cable system swaps are subject to customary closing and regulatory approvals and are expected to close by mid-2000.
EUROPE
Veba and RWE to Sell Cable TV Network for 1.2 Billion DM
Veba AG’s and RWE AG’s Telecolumbus cable TV network could be sold this week for at least 1.2 billion dm. The bidding period ends tomorrow and a decision could be announced as early as Thursday. The most likely candidates to acquire Telecoloumbus are the German cable TV operator Primacom AG and Deutsche Bank AG. Deutsche Telekom to Reduce Rates on Calls to Europe and North America by June 1
Deutsche Telekom to Cut Rates on Calls to Europe and North America by June 1
Deutsche Telekom announced that it would reduce rates on long-distance calls to Europe and North America from June 1. In a statement, the company said that as a result of the move, there would be a single price of 48 pfennings per minute for calls made to 22 counties in Europe and North America at all hours of the day. For calls made to European nations bordering Germany, the rate will fall to between 12-36 pfennings, depending on the nation. In addition, a 10-minute telephone call to Italy or the US will cost only 4.80 DM instead of a previous 8.40 DM or during off-peak hours, 7.20 DM.
Swisscom to Reduce Mobile Telephone Rates by 25 Percent by June 1
Swisscom AG announced that it would reduce its mobile telephone prices by up to 25 percent by June 1. The company said the lower prices are not restricted to any specific group of clients, adding that it will soon have 2 million mobile telephone customers.
FIBER OPTICS
KPNQwest Raises $805 Million to Complete Macro-Capacity Fiber Optic Network in Europe
Qwest Communications International, Inc.’s joint venture KPNQwest has raised $805 million to complete construction of their fiber optic network which covers 39 key business market in Europe. The sale of the notes represents the largest Euro and non-dollar offering ever competed, and the largest high-yield bond offering by a continental European issuer. The $450 million of 8 1/8 percent, 10-year notes sold at 99.293 to yield 8.232 precedent or 275 basis points more than US Treasury notes of comparable maturities. The 340 Euro ($357 million) or 7 1/8 percent notes sold at 99.261, for a yield of 7.23 percent or 325 basis points above the 10-year German bonds. Upon completion in 2001, the European network will provide broadband IP-based communications services to customers, and will be linked to the 18.500 mile Qwest US network, which will be completed in June.
JDS FITEL and Uniphase Schedule Shareholder Meetings to Approve Merger
JDS FITEL and Uniphase Corp. announced that the shareholder meetings to approve the merger of the two companies have been scheduled for June 28, 1999. This announcement follows approval by the US Securities and Exchange Commission of the joint proxy statement for mailing to the shareholders of the two companies. The shareholders will be asked to consider and vote upon the proposal to merge the two companies to form JDS Uniphase Corporation. In addition, Uniphase stockholders will be asked to consider and vote upon proposals to increase the number of shares authorized from 100 million to 200 million and increase the number of shares of common stock available under its employee stock purchase plan from 1 million shares to 2.5 million. The companies anticipate mailing the JDS FITEL management information circular and the Uniphase proxy materials to shareholders on or before June 2, 1999.
RCN Prices Public Offering of Common Shares
RCN Corp. announced that it has priced the primary public offering of 8 million shares of its Common Stock at a public offering price of $39 per share. The net proceeds from the offering of the Common Stock to RCN are $300 million. The underwriters have an option to purchase up to 1.2 million additional shares of Common Stock from the company solely to cover allotments, if any. Salomon Smith Barney and Merrill Lynch and Company are joint lead managers for the offering. Additional underwriters include Morgan Stanley Dean Witter, Donaldson Lufkin & Jenrette, First Union Capital Markets Corp., Prudential Securities, Banc of America Securities LLC, Deutsche Bank Securities and Chase Securities.
INTERNET
Cisco Systems and Microsoft Fund Creation of Internet Business Exchanges
Cisco Systems Inc., Microsoft Corp. and Benchmark Capital have funded the creation of a company called Equinix to construct and operate Internet business exchanges. The size of the investments was not disclosed. Equinix said the business exchanges would allow Internet service providers, content providers and component service providers to interconnect with a wide range of partners and customers.
Prodigy to Acquire Cable and Wireless’s US Dial-up Internet Service for About $50 to $75 Million
Prodigy Communications Corp. plans to acquire the US dial-up Internet service of Cable & Wireless PLC for approximately $50 to $75 million. The final price of the deal is contingent upon the amount of Cable and Wireless subscribers decide to stay with Prodigy. Prodigy estimates the total amount could range from 125,000 to 200,000. The deal covers only the dial-up subscribers. The company’s proposed deal with the UK based company is part of their plan to provide Internet access to Hispanics and small businesses. The deal will enable Prodigy to expand quickly from its current membership base of 736,000.
WIRELESS
Motorola Wins Contract to Bell Atlantic with One Million Digital Phones
Motorola Inc. has won a contract to supply the mobile-phone subsidiary of Bell Atlantic Corp. with one million phones, one of its largest sales of wireless handsets. Analysts predict the deal will likely contribute to a sharp market share gain for Motorola in the hotly contested area of digital handsets. At this time, neither company would comment on the value of the sale, which includes two models of Motorola’s StarTac folding phone, plus accessories. However, outsiders estimate the contract for the CDMA phones, which will run for about 12 months, will be worth over $250 million.
CHINA: Special Supplement
China to Launch a Broadband IP Network Project
A high speed Internet project, known formally as the Broadband Internet Protocol Network Model Project, was ratified recently by the State Development Planning Commission under the State Council. This will be a broadband, high-speed network that is designed and built for Internet Protocol (IP) services.
According to Ms. Zhang Rong, Vice President of Science and Technology Information Center of the Ministry of Information Industry, this project involves the Chinese Academy of Sciences (CAS), the Ministry of Railways (MOR), the State Bureau of Radio, Film, and Television (SBRFT) and Shanghai Municipal People’s Government. The project is scheduled to start construction later this year. The four participants will invest RMB300 million (US$36 million) initially to build a backbone network, linking 15 major cities in the eastern part of China, including Beijing, Shanghai, and Guangzhou.
Ms. Zhang Rong will be speaking at China Telecom 2000 conference to be held in Washington DC June 2-3 next month. She will speak on the Internet development in China and the recent policy changes on IP phone services. According to her, China Telecom, China Unicom and Ji Tong Corp., will start Internet phone services in 25 cities across the country.
For more information on the China Telecom 2000 conference visit IGI’s website: http://www.igigroup.com.
China Unicom to Offer Internet Service on Mainland
China gave state-owned China Unicom, its second-largest telecommunications carrier, permission to become the country's fifth Internet service provider, the China Securities newspaper reported, citing the State Council, China's cabinet. The newspaper said the service would commence at the end of the year.
China Urged to Set Up New Telecom Company
Chinese economists are calling for the establishment of a new telecommunications firm incorporating the existing network and equipment of the railway industry, the China Securities newspaper reported. The proposal, presented by several economists of the powerful State Development Planning Commission (SDPC), had won widespread support in the Ministry of Information Industry, the official newspaper said. The plan could foster competition in the domestic telecommunications market, as reform underway have not created an "effective competition mechanism," it quoted SDPC economists as saying.
IP Telephone Service Offered in Shanghai
China Telecom has started its voice over IP pilot project in Shanghai. Dubbed Yitong Telephone Service, the newly launched IP telephone network relies on dedicated lines for service provision. Yitong offers tariffs lower than IDD. Rates to Hong Kong and Macau are 3 RMB (US$0.38) per minute.
China Urges West to Match Words with Action on WTO
China urged Western countries to match their words with action and allow Beijing to join the World Trade Organization (WTO) this year. But Foreign Ministry spokesman Zhu Bangzao told reporters China would not make more trade concessions than it could. He did not say where the limit was.
Ericsson to Sell US$290 Million Mobile Equipment to China Telecom (Hong Kong)
Ericsson will sell US$290 million of mobile equipment to China Telecom (HK) Ltd. to help the Chinese firm expand its network in southern China. The GSM technology-based equipment will help double China Telecom's subscriber capacity to 8 million in Guangdong, the nation's richest province, said Stockholm-based Ericsson. The upgrade will start in June and be completed in 2000.
NetMoves Signs Agreement with China Telecom on Internet Fax Services
NetMoves of the US announced an agreement with China Telecom to distribute NetMoves' Internet Fax Services throughout China's Guangdong province. Under the agreement, NetMoves will install an Internet Fax node and provide Internet Fax services to customers of YiTong Telecom Service Enterprise Limited, China Telecom's subsidiary based in the city of Shenzhen - a free-trade zone.
Nokia Wins US$30 Million GSM Expansion Order from China's Zhejiang Mobile
Nokia Corporation won an order worth about US$30 million to expand Zhejiang Mobile Communications Co. Ltd.'s GSM network in China. The expansion, scheduled for completion by the end of August, will raise the network's capacity to 1.7 million subscribers. The network currently serves Wenzhou and Taizhou, and the Harbor City of Ningbo.
Marconi Joint Venture Wins New Orders from Chinese Rail Ministry
Marconi Communications' joint venture company, Shanghai GPT, has won the first of a new series of orders form the Chinese Ministry of Railways (MOR), as part of a program worth over US$ 10 million to upgrade the communications system on the country's rail network. The agreement is a milestone in the fast-developing role of Marconi in China, as Shanghai GPT will supply the Ministry with products sources from both its UK factory in Coventry and the Shanghai factory.
MOR to Install Fiber Optic Network
Alcatel is going to provide the Ministry of Railways with a SDH fiber optic transmission system for the Beijing-Hohhot-Baotou railway. The US$2.66 million contract calls for the supply of a 700 km trunk starting in the east from the Communications Center of the Ministry of Railways in Beijing and ends at Baotou in the west via Shacheng, Datong, Jining, and Hohhot.
Nortel Raises Wireless Investment
Nortel Network will include an additional investment of US$30 million in its joint venture Guangdong Nortel for the production of GSM and CDMA network equipment. The vendor has also signed a US$60 million deal with UNICOM for the expansion of two existing GSM networks in Zhejiang province.
MAY 26, 1999
HEADLINES - Top Stories
ADSL
Bell Atlantic and Prodigy Form DSL Access Alliance
ASIA PACIFIC
Bell Atlantic and Prodigy Form DSL Access Alliance
Matsushita Communications Joins Forces with Symbian Ltd. to Establish Mobile Computing Standard
Fujitsu Posts First Group Net Loss in Five Years
EUROPE
EU Clears Mannesmann, Bell Atlantic Joint Acquisition of Omnitel
Philips to Invest $10 to $100 Million in New Silicon Valley Companies
Pirelli’s Tronchetti Contends Company Can Defend Competitive Position in Difficult Year
Mannesmann’s Esser Predicts Infostrada Fiscal Year Loss will exceed 100 Million Euros
E-COMMERCE
Bertelsmann’s Barnesandnoble.com Prices IPO at $18 a Share
FIBER OPTICS
Nortel Networks and Tyco Submarine Systems Sign Agreement to Jointly Offer Terrestrial and Undersea Global Optical Communications Networks
Southland Financial Inc. Signs Landing Right Agreements with Project Oxygen
C-Cor Electronics to Acquire Silicon Valley Communications for $50 Million
Charter Communications to Acquire Assets of Falcon Cable Holdings in $3.6 Billion Stock Swap
Charter Communications is expected to announce today that it will acquire the cable assets of Falcon Cable Holdings of Los Angeles in a $3.6 billion stock swap. Senior executives of both companies have been in negotiations for only a few weeks. In addition, Paul Allen is in talks to purchase two other smaller cables companies. This latest acquisition is the latest purchase as part of Allen’s effort to expand his presence in the cable television business. During this year alone, his company has spent $3.7 billion in cable purchases, including last week’s announcement that it would acquire Avalon Cable Television for $845 million. With this acquisition, Charter Cable would have access to 1.2 million subscribers in several small and medium-sized markets in several states, including Oregon, Missouri and California with a focus on Los Angeles. Allen’s recent acquisition spree may place Charter in solid position to challenge AT&T and other major telecommunications companies striving to gain access to cable assets as a means to expand Internet capabilities to the home. However, this deal could be complicated in that TCI Cable owns a 47 percent stake in Falcon. Last year Falcon partnered with TCI to restructure itself and refinance its heavy debt load. At that time, the chairman and chief executive of Falcon, Marc Nathanson, was considering taking Falcon public or remaining an independent company. It has been suggested that AT&T would consider selling its stake, which it will acquire in the TCI deal, once Falcon begins selling shares to the public.
More Enterprise Networks Information
Intel Invests $200 Million in Williams Communications
The Intel Corp. agreed yesterday to invest $200 million in Williams Communications, and plans to use Williams’s high-speed fiber optic network in its server farms that will host Web sites. Through Williams’s fiber optic network, Intel will connect the Intel Internet data operations, which will be housed in large buildings full of servers that can be used to store and manage Web sites for companies that lease computing power.
More Fiber Information
Telecom Italia’s Chairman Franco Bernabe Resigns as Olivetti Wins 52 Percent Acceptance in Telecom Italia Takeover Bid
Telecom Italia’s chief executive Franco Bernabe and the board of directors resigned yesterday as Olivetti SpA received acceptances for 51.868 percent of Telecom Italia’s SpA’s ordinary capital, or 2.276 billion shares. Both resignations were highly expected, but Bernabe was the first top executive to resign since the three month battle for control of the company ended on Friday, when Olivetti won 51.9 percent of the company’s shares in a tender offer. At the Telecom Itlalia shareholders meeting in June, the company is expected to choose a new board of directors and appoint new management. It is likely that Roberto Colaninno, Olivetti’s chief executive, will take over as chief executive of the company. Olivetti said in a communiqué giving final results of its takeover offer. Olivetti offered, via its Tecnost SpA unit, 11.5 eur in cash and paper per Telecom Italia ordinary share. The tender began on April 30 and ended on May 21.
More European Information
Hewlett Packard Realigns Direct Sales Business Unit as Prelude to Possible Public Offering
Hewlett Packard has realigned its direct-sales business as a wholly owned subsidiary as a prelude for a possible public offering of the unit. The new subsidiary, which will be called Hpdirect Inc., will handle Internet and other direct sales of HP’s computers, printers and other products. The company launched the business in an effort to compete with online retailers such as Dell Computer Corp. without alienating its traditional brick and mortar retailers.
MoreTelecom Information
ADSL
Bell Atlantic and Prodigy Form DSL Access Alliance
Bell Atlantic has formed a strategic alliance with Prodigy Communications Corp to provide DSL services for Prodigy Internet subscribers in the Northeast. The service should be available in approximately two months, and pricing has not been disclosed.
More Enterprise Networks Information
ASIA PACIFIC
Fujitsu Posts First Group Net Loss in Five Years
Fujitsu yesterday reported a group net loss of 13.64 billion yen for fiscal 1998 ended March 31, the first consolidated loss in five years. The Japanese and telecommunications equipment manufacturer attributed the poor result to slack domestic sales of telecommunications equipment and sagging chip prices. It also cited a cut in investment by Nippon Telephone and Telegraph Corp. as well as expenses related to the closing of a chip plant in Britain as other factors behind the loss. The company said it would keep its per-share dividend unchanged at 10 yen for the year despite the group net loss, which follows a group net profit of 5.59 billion yen in the previous year.
Matsushita Communications Joins Forces with Symbian Ltd. to Establish Mobile Computing Standard
Matsushita Communication Industrial Co. has agreed to take a an equity stake in Symbian Ltd., a joint venture among portable phone manufacturers that hopes to make its operating system the standard for mobile computing. This deal, to be announced later today, is a direct challenge to Microsoft for control of the hand-held wireless devices for Internet access. Although the size of their stake has not been disclosed, Matsushita is the first company to take a stake in Symbian. Current shareholders in Symbian include Motorola, Telefon AB LM Ericsson, Nokia Corp. and Psion PLC. The competition has been heating up in this sector as Microsoft, who wants to use its Windows CE software, earlier this month acquired a 4.25% stake in Nextel Communications for $600 million. Matsushita’s entry into the Symbian alliance will provide them with a major ally to challenge rival Microsoft.
Philippines Digitel Denies Strategic Talks with British Telecom
Digital Telecommunications Philippines denied market speculation it is holding discussions with British Telecommunications PLC and other foreign telecommunication companies for a possible strategic alliance. In a notice to the exchange, Digitel they are not presently conducting any negotiation with British Telecom or any other carrier for any strategic partnership.
More Asia Pacific Information
EUROPE
EU Clears Mannesmann, Bell Atlantic Joint Acquisition of Omnitel
The European Commission has cleared the acquisition of joint control over Omnitel Pronto Italia SpA by Mannesmann AG and Bell Atlantic. The acquisition, which is conditional on the exit from the company of Olivetti SpA, will not lead to the creation of European market share in excess of 15 percent, and not above 30 percent in Italy.
Philips to Invest $10 to $100 Million in New Silicon Valley Companies
Royal Philips Electronics NV will invest 10 to 100 million a year in promising new companies in Silicon Valley, reported Het Financieele Dagbad, citing Philips’ R Savelburg, who is in charge of the capital injections. Salveburg said Philips has already invested in two Silicon Valley companies, Sharewave and Tivo. He declined to specify the amount of the investments, but said investments will generally be between $1 and $10 million. The new investment policy is one of the initiatives set up by Roel Pieper, who last week resigned his position as Philips vice president. In addition, the company is considering investing in new companies in Israel, seen by many Silicon Valley’s closest rival in terms of new high-tech companies.
Pirelli’s Tronchetti Contends Company Can Defend Competitive Position in Difficult Year
Pirelli SpA chief executive Marco Tronchetti Provera said the company can "defend its competitive position" in what he expects will be a difficult year due to the real’s devaluation and a 700 billion lire increase in company debt levels. Speaking at the company’s AGM, Tronchetti said the company has no current plans to convert its saving shares into common shares. Pirelli is waiting to see what Sirti SpA management wants to do and is open to holding talks regarding the company’s stake. Pirelli shareholders approved the merger of Societe Internationale Pirelli SA into Pirelli SpA. Under the terms of that deal, Pirelli and Co will control no less than 30 percent stake and BZ Bank owner Martin Ebner will control a 10 percent stake in Pirelli SpA.
Mannesmann’s Esser Predicts Infostrada Fiscal Year Loss will Exceed 100 Million Euros
Mannesmann AG chairman Klaus Esser said Infostrada’s 1999 net loss would be much high than 100 million euros. Infostrada had previously said it expects its 1999 net loss to be lower than its 1998 net loss of 187 billion lire. Speaking at an analyst conference call, Esser said Infostrada should break even in 2000.
More European Information
E-COMMERCE
Online bookseller Barnesandnoble.com priced its 25 million share initial public offering at $18 per share late yesterday, dealers said. Bertelsmann AG and US book retailer Barnes and Noble will each own a 41 percent stake in the company. Banresandnoble.com yesterday raised the pricing range to 16-18, from the $11-13 range listed in earlier filings with the SEC. Analysts said that BNBN will be the second largest Internet-related IPO and the company is expected to compete directly with Amazon.com.
More Enterprise Networks Information
FIBER OPTICS
C-Cor Electronics to Acquire Silicon Valley Communications for $50 Million
C-Cor Electronics will acquire Silicon Valley Communications for more than $50 million in stock and assumed debt to offer more fiber optic products. C-Cor, which makes signal amplifiers, processors and network management equipment mainly to deliver TV programs, did not disclose terms of the agreement Silicon Valley, which is based in Santa Clara, CA, manufactures transmitters and receivers for video and Internet
Nortel Networks and Tyco Submarine Systems Sign Agreement to Jointly Offer Terrestrial and Undersea Global Optical Communications Networks
Tyco Submarine Systems and Nortel Networks have entered into an agreement to jointly provide their customers with optical solutions for global terrestrial and undersea communications networks. With this agreement, TSSL and Nortel Networks are executing their shared vision to provide end-to-end networking solutions available from both companies. The scope of the agreement includes joint marketing, supply, services, and possible research and development.
Southland Financial Inc. Signs Landing Right Agreements with Project Oxygen
Southland Financial, Inc. has in conjunction with its subsidiary operating company in Hong Kong, United Telecom Limited finalized contracts with Project OXYGEN Limited. The contracts provide United with the Landing Party Rights to the Project OXYGEN Network in Hong Kong. In addition, United signed a substantial capacity push agreement for access to the Project OXYGEN Network. The Project OXYGEN Network is targeted to be fully operational in Hong Kong by December 2001. Mr. David A. Turik, Chairman of Southland said that the timing of the proposed Project OXYGEN network fits well with Southland’s plans in Hong Kong.
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MAY 24, 1999
U.S. Court of Appeals Blocks FCC Telephone Access-Charge Rules
On Friday the US Court of Appeals for the District Court of Columbia blocked rules setting the charges telephone companies pay for access to each other’s lines. The ruling was a big win for the Baby Bell companies at the expense of long-distance carriers and consumers. The court ruled that the FCC did not clearly explain certain changes to a complex formula that automatically reduce the access payments long-distance telephone companies pay the Bells each year to connect calls. The judges involved in the ruling ordered the agency to reconsider the regulations and report back to the court. However, the ruling is only a win for the Bells in the short term as the FCC could later introduce a larger annual reduction in access charges that would reduce the cost of long-distance carriers and consumers. With the court ruling, consumers will be required to pay for the FCC’s plan to wire American schools and libraries to the Internet, but senior FCC officials contend there is enough money already
to pay for the program.
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Olivetti Comes out as Victor in Battle for Telecom Italia
The three month saga between Telecom Italia and Olivetti came to an end on Friday as Telecom Italia’s shareholders defected en masse on the last day of Olivetti’s offer, giving the smaller rival a controlling 51 percent stake in a company five times its own size. According a report in The Wall Street Journal, Olivetti’s takeover is a sign of the growing influence of US-style capitalism in Europe. Olivetti will spend approximately $33 billion to acquire its stake in Telecom Italia, which it plans to finance in part by issuing $7.9 billion in bonds and by selling its stakes in Infostrada SpA, a fixed-line operator, and Omnitel Pronto SpA, Italy’s second largest mobile operator. A large part of the acquisition will be financed by going heavily into debt, making a bold gamble on Olivetti’s ability to turn around a company that is still steeped in a monopoly culture it long enjoyed. However, Olivetti’s win will have many repercussions to others involved. One company who will be hit the hardest will be Deutsche Telekom AG, which recently dropped a long standing alliance with France Telecom SA to merge with Telecom Italia SA in an $81 billion all stock merger that would of saved Telecom Italia from the hands of Olivetti. This puts Deutsche Telekom into a tough spot with its existing foreign ventures including its alliance with France Telecom that includes with Sprint Corp., Wind Telecomuniczioni SpA consortium in Italy and the Global One Alliance. Although it looks like the merger with Telecom Italia is unlikely to happen, Deutsche Telekom Chief Executive Ron Sommer said he would continue to press on with their international strategy and the merger plan with Telecom Italia.
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IBM Sells 185,000 Shares for $25.3 Million
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