Headlines - JUNE 25, 1999
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Nortel Networks Wins $5 Billion Supply Contract from BellSouth
Nortel Networks yesterday won a $5 billion equipment contract from BellSouth Corp. as its seeks to update its worldwide networks with Internet technology. Under the terms of the agreement, Nortel will supply BellSouth with equipment to handle wireless, data and Internet traffic over a 10-year period.
Level 3 Communications Sign $250 Million Agreement to Deploy Lucent’s Softswitch in IP-Based Network
Level 3 Communications Inc. has signed a four-year, $250 million strategic agreement with Lucent Technologies to purchase Lucent systems, including softswitches. The agreement has the potential to grow $1 billion over five years. Under the terms of the agreement, Lucent will provide Level 3 its softswitch, a Bell Labs developed switch designed for IP network capability. Also, the two companies agreed to collaborate on future enhancements of softswitches and gateway products to support broadband services for business and consumers for voice and video communications with Internet-style web data services.
GTE to Sell Airfone Unit to Oak Hill Capital Partners LP
As it continues to realign its focus towards wireless, local phone and data communications businesses, GTE announced that it would sell its in-flight phone unit of Oak Hill Capital Partners LP, a private equity fund. At this time, terms of the deal were not disclosed. GTE, which is in the process of merging with Bell Atlantic Corp., said the deal is part of the company’s overall effort to meet its target of realizing $3 billion from the sale of nonstrategic operations, including local telephone access lines and defense related telecommunications operations. Earlier this week the company agreed to sells three of its military communications units to General Dynamics Corp. for $1.05 billion. Also, last month, GTE sold about 200, 000 of its domestic phone lines in noncore areas in the US by the end of 1999. GTE maintains that these deals have no relationship with their pending merger with Bell Atlantic and are part of a restructuring process announced in April 1998. The merger with Bell Atlantic was announced three months later.
CompUSA to Reduce 7 Percent of its Workforce
In an effort to regain its former stance, CompUSA Inc. announced that it would lay off about 7 percent of its workforce, close at least four stores, and hire another company to manage its nonretail sales. It is estimated that the restructuring process will cost about $40 to $50 million, resulting in a per-share charge of 43 cents to 54 cents against earnings for its fiscal fourth quarter, which ends tomorrow. Analysts previously predicted that the company would suffer a loss of 23 cents a share for the period.
Hutchinson Whampoa to Invest $957 Million to Increase Stake in VoiceStream
Hutchinson Whampoa will invest $957 million to increase its stake in US-based cellular company VoiceStream Wireless Corp. The Hong Kong-based Company is one of the largest providers of cell phones in Asia. Under the terms of the deal, Hutchinson will increase its 24 percent stake in VoiceStream, as the company purchases Omnipoint Corp. for $2.04 billion in cash and stock. Upon completion of the deal, Hutchinson will own about 30 percent of the combined company, which will then become a major force in the US cellular phone market.
Cisco Systems Completes Acquisition of Sentient Networks
Cisco Systems Inc. has completed its acquisition of Sentient Networks Inc., which is based in Milipitas, CA. At the time the acquisition was announced, the deal was valued at about $125 million.
ASIA PACIFIC
Telstra Plans to Construct a Submarine Cable Network Linking Australia to Japan
Telstra Corp announced that it plans to build a 10,200 kilometer fiber optic submarine cable network linking Australia and Japan in a venture with the US and Japanese companies. The cable will link the East Coast of Australia with Japan, where it will be connected with other existing submarine cables to Asia and North America. The Australia-Japan cable, which has a projected capacity of 640 Gbps, will cater to Australia’s high demand for Internet access, voice, high-speed data and multimedia services. It is expected that a construction contract will be awarded at the end of this year and the cable will be ready for service in March 2001. A memorandum of understanding for a feasibility study was signed recently between the three partners. The company did not name its US and Japanese partners, both of which are public-listed companies, because they had requested their names not to be disclosed yet.
BRAZIL
Unisys Wins Brazil Data Processing Company Datamec for 83.6 Million Reals
Unisys Corp. was awarded data processing Company Datamec for 83.6 million reals in an auction, which had been previously owned by former state bank Caixa Economica Federal. Unisys was the only bidder in after International Business Machines Corp and Brazil’s Montreal, which had expressed an interest, declined to present offers. Datamec had 1998 profits of 22.9 million reals.
State Prosecutors File Suit against Luiz Carols Mendonca de Barros for Alleged Interference in the 1998 Telebras Privatization Process
State prosecutors have launched proceeding for alleged administrative wrongdoing against telecommunications minister Luiz Carlos Medonca and others in connection with last year’s privatization of Telecomunicacoes Brasilieras SA. The suit alleges that the former minister and national development bank officials went beyond legal powers by favoring the Opportunity consortium in the selloff of the Tele Norte Leste concession, which includes Rio de Janeiro, the prosecutors said. In the event, the consortium failed to win the concession.
CELLULAR
Cellular One Proposes New Billing Charges
Beginning on July 1, Cellular One plans to begin imposing charges 15 seconds after the customer hits the send button on a call. The charges would apply even it no connection was made. Since the company charges subscribers in one-minute increments, the new policy means that calls that ring more than 15 seconds will carry at least a one-minute charge, or about 52 cents depending on the customer’s calling plan. And if the customer has free calling minutes, minutes will be being deducted after 15 seconds. In response to the negative response the charge might have, the company said in a statement yesterday that by allowing a grace period of 15 seconds, more channels would remain open for use by other customers.
CHINA
China Hopes US will not ban high-tech Exports Via Hong Kong
China has said it hopes the US House of Representatives will not approve a Senate bill seeking to curb high-tech exports to China via Hong Kong. "The bill interferes in the sovereignty of China," foreign ministry spokeswoman Zhang Qiyue told reporters at a regular news briefing. The passage of the bill by the US Senate on Wednesday, June 23, 1999, follows allegations in a US congressional report that Hong Kong has been used by China to smuggle in sensitive US technology. The bill says Hong Kong will be subject to the same controls as China unless it lets the US check strategic goods exported to the territory before and after shipment.
EUROPE
Poland Government Plans Privatization of Telekomunikcaja Polska
The Polish government’s planned sales of a strategic stake in telecommunications company Telekomunikcaja Polska SA could raise between US$4 billion and US$5 billion, or a 60 percent premium of at least 60 percent over the company’s current market value. This proposed sale would make TSPA’s privatization the country’s largest ever. Communications Minister Maceiej Srebro said his assessment of TSPA’s value reflects strong international interest in Poland’s telecommunications sector. The government plans to begin selling in late July or early August between 25 to 50 percent of the company, SBC Communications and France Telecom have both expressed great interest in the sale.
Telia Sees Sale of Cable Assets as Means to Gain Approval of Merger with Telenor
The proposed merger between state owned telephone companies Telia of Sweden and Telenor of Norway could be severely hindered it the European Union forces Telia to sells its cable television assets. Those close to the situation say that without their cable assets then Telia will not be able to move forward with its Internet aspirations. Last week the European Commission launched an antitrust investigation into the planned merger, and commission officials said divestiture of cable operations would help resolve concerns about competition in Nordic markets. Yesterday and EU spokesman refused to comment on suggestions that the deal would be endangered if Telia had to sell off its cable operations to gain merger approval.
Sonera and Telia Suspend Talks on National Roaming
Sonera Group PLC has suspended talks with Telia AB unit Telia Finland Oy on the terms of a mobile telephony roaming agreement were suspended until further notice at Telia’s initiative. The company said its offer to Telia, which is structured along the lines of the compromise proposal previously submitted by the Finnish ministry of transport and communication remains valid. The tripartite talks between Sonera, Telia and ministry officials were meant to bring about an agreement on the financial conditions under which Telia subscribers would be allowed to use Sonera’s network in those areas of the country, mainly rural Finland, where Telia has no infrastructure of its own. However, Telia still considers Sonera’s offer as too expensive. Sonera will continue, at the request of the ministry of transport and communication, to allow use of its GSM network by those about 350 Telia subscribers who had bought the Telia Dual subscription before the dispute on roaming conditions arose.
Alcatel Signs Framework Agreement for Portugal’s TMN GSM Network
Alcatel has signed a framework agreement to supply Portugal Telecom’s mobile operator unit Telecomunicacoes Moveis Nacionais with infrastructure solutions for its GSM network in the Lisbon area. Alcatel will be in charge of acquiring new sites as well as replacing and providing new equipment, and will also manage the operation and maintenance of the network. An initial order worth 15 million Euro has been signed in the context of the agreement.
Telefonica to Pay 402 Million stg for 5 Percent Stake in Pearson PLC
Telefonica SA will pay 402 million stg, or 13.16 stg per share, for the 5 percent stake in Pearson PLC it plans to acquire as part of its decision to widen the scope of its alliance with the UK Media Company. The company said the price is in line with Pearson’s closing share price on Tuesday, June 22, 1999. Shares in Pearson dominated the FTSE 100 leader board in late morning trade on June 24 as investors responded enthusiastically to the disposal of the group’s stake in merchant bank Lazards and news of an alliance with Telefonica SA. The 410 million stg sale of Pearson’s stakes in the Lazard banking houses in London, Paris, and New York represents the crowning move in a radical restructuring of the business carried out by chief executive Marjorie Scardino over the past two years. Simultaneously, news of the significant investment in Pearson by Telefonica, it is taking a 5 percent stake in Pearson and selling its 20 percent stake in Recoletos, and the creation of a venture to jointly explore opportunities in multimedia and Internet services in the UK and the Spanish and Portuguese speaking world has lifted the shares. Pearson benefits by Telefonica’s potential market reach of over 530 million people through its Spanish and Latin American investments.
Swisscom Claims to have 2 Million Mobile Phone Subscribers at Mid-June
Swisscom AG said it had 2 million subscribers on its Natel mobile phone business by mid-June. At the beginning of 1999 the company’s market share stood at 22 percent, but until an average market penetration rate of 50 percent and above is achieved, as in Nordic countries, there is still room for further growth.
Bell Atlantic Will Not Expand in Europe before Telecommunications Market is restructured
Bell Atlantic Corp. Ivan Seidenberg said his company would not expand in the European market before the restructuring of the European telecommunications industry is completed. "We will wait until the restructuring in the European telecommunications industry has been completed," Seidenberg told Capital Magazine. Further, the baby bell would like to expand its partnership with Mannesmann AG in the Italian mobile phone operator Omnitel. It would also be important that a partner in Europe not only looks at its domestic market but also pursues a European strategy.
Telefonica and Motorola Sign Strategic Collaboration Agreement
Telefonica SA has signed a strategic collaboration accord with Motorola Inc aimed at strengthening ties between the two groups. The agreement will make Motorola the group’s preferred supplier and will lead to more widespread use of mobile telephones. Chairman Juan Villalonga said the agreement would allow Telefonica to further its expansion into new markets and reinforce its competitive position in those countries where it is already present. As part of the agreement, the two companies plan to form working groups in specific areas, such as connection services Internet and mobile telephone terminals.
INTERNET
MindSpring in Discussion about Possible Alliances
Following a statement that the company is in discussions to create possible business alliances, MindSpring Enterprises Inc.’s stock rose 4.5 percent. The company, which has about one million customers, has been considered a good target for a takeover or an investment. It is one of the few Internet companies that have been profitable with a strong reputation for customer service. This announcement comes amidst a flurry of deals that have recently come about in the Internet business. Earlier this week, the Wall Street Journal reported that Gateway Inc. is in negotiations with EarthLink Network Inc., an ISP similar in size to MindSpring.
SOUTH AMERICA TELECOM
Argentina Telecom Sells 250 Million Euro, 3-year Bonds at 7.25 Percent
Telecom Argentina Stet-France SA holds 250 Euro of 3-year bonds at 7.25 percent. The company planned on selling 200 million euros of the bonds, which will be listed in Luxembourg and Buenos Aires, but increased the issue due to strong demand.
Headlines - JUNE 24, 1999
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AT&T Predicts Delay in Bell Atlantic’s Entrance into the Massachusetts Long Distance Market
A top level AT&T official predicts that there will be a long delay in Bell Atlantic’s entrance into the Massachusetts long-distance market. He argues that is a reflection of the Baby Bell’s poor record opening up its New York system to local competition. However, Bell Atlantic executives balked at this premise, saying they feel confident they will begin offering Massachusetts resident’s long-distance service by the end of 1999. Under the terms of the Telecommunications Act of 1996, all Bell companies must meet a 14-point checklist proving they have opened their local networks to rival carriers before they can seek Federal Communications Commission approval to enter the long-distance market. So far in New York, their efforts to meet the terms of the checklist have been met with several problems. One of the major problems are so-called hot cuts, the ability to instantly change an active phone number from Bell to a competitor, the switched customers appearing from phone directory lists,
and other technical problems.
VoiceStream Wireless to Acquire Omnipoint for $4.5 Billion
VoiceStream Wireless will acquire Ominpoint Corp. for about $4.5 billion in stock, cash and assumed debt, to create a US cellular telephones network. To pay for the company, VoiceStream will pay 0.825 shares and $8 in cash for each share of Omnipoint, or $32.3375 a share, a 55 percent premium over Omnipoint’s closing share price yesterday. Also, Hutchinson Telecommunications Ltd., which holds a 24 percent stake in VoiceStream, has agreed to invest $957 million in cash in the combined company. Omnipoint had $2.15 billion in long-term debt at the end of the first quarter that VoiceStream will assume. With this acquisition, VoiceStream will become a major player to compete against other carriers such as AT&T, Sprint and Nextel Communications.
Metromedia Fiber Network to Acquire AboveNet for $1.76 Billion in Stock
Metromedia Fiber Network Inc. will acquire AboveNet Communications for $1.76 billion in stock. With the acquisition, Metromedia will gain a presence in the expanding Internet sector, which AboveNet currently specializes in. Under the terms of the agreement, AboveNet shareholders will receive 1.175 shares of Class A Metromedia Fiber stock for each share of AboveNet. Currently, Metromedia is constructing fiber networks in New York, Washington, Dallas and Los Angeles, and is also building an intra-city network along the East Coast.
Qwest to Raises Bid for US West and Frontier Corp.
Only days after their takeover bids received the cold shoulder, Qwest Communications International has decided to raise its hostile takeover bids for US West and Frontier Corp. Despite the fact that both of these companies have agreed to merge with Global Crossing, Qwest’s chief executive Joseph Nacchio last week made his first attempt to break up these agreements in a hostile $55 billion offer for both of the companies. Following the bid, however, Qwest’s stock fell 24 percent on June 14 in record trading after investors balked against the offer. Yesterday, Nacchio decided to sweeten the bid by proposing to give Frontier shareholders $20 in cash and $48 in Qwest stock if it agreed to be acquired by Qwest; and US West shareholder would receive $69 in Qwest stock, bringing the total value of the offers to approximately $47 billion. On the other hand, Global Crossing will give Frontier shareholders $63 a share in stock, and US West would receive $61 in stock based on Global Crossing’s
current stock price.
3Com to Repurchase15 Million Shares
Following strong fourth quarter earnings, 3Com Corp.’s board of directors has authorized a repurchase program of up to 15 million shares in common stock. Yesterday, 3Com’s fourth quarter earnings beat analysts expectations by 1 penny, up 17 from 1998 and up from Wall Street expectation of 23 cents. The company plans to buy back its shares in the open market, and expects the move to help offset the issuance of shares for employee stock plans. The company had strong sales in LAN switches, hubs and remote access, which rose 17 percent from 1998 to $784.7 million. Fourth quarter sales of modem and network interface cards however product dropped 10 percent from 1998 to $630.9 million.
ASIA PACIFIC
Telstra to Acquire Stake in Alcatel’s Singapore Unit Skybridge
Telstra will acquire a significant stake in Alcatel’s majority owned unit Skybridge LP, which is based in Singapore. Telstra public affairs manager Suzanne McKenzie said the financial details of the deal would not be finalized for the next couple of months, but the company will be taking a significant stake. In addition, Skybridge has signed a deal with Telstra to offer high-speed broadband Internet and video service beginning in 2002.
Marconi Communications Establishes Regional Center in Singapore
Marconi Communications has established a regional center in Sinagapore in a move designed to boost its presence in Southeast Asia. The new center, which will be named Marconi Communications Singapore Ltd., will provide sales, installation and support for the region in the company’s core global activities including telecommunications products, systems integration and telecommunications services. Kevan Perrins, Marcnoni’s regional director for Singapore and Southeast Asia, said the company is also confident of setting up projects in Thailand and Indonesia, ‘once the government gets sorted out’ after Indonesia’s general elections.
BRAZIL
Philips Plans to Build Two New Plants in Brazil
Royal Philips Electronics NC plans to invest approximately US$282 million in Brazil to construct two new plants. The company is in talks with officials in Sao Paulo regarding the plans to build a factory to manufacture wide-screen televisions and a plant to produce glass used for televisions. Philips is looking to take advantage of tax advantages similar to those offered to Korea’s Samsung Corp.
Ericsson Wins US$100 Million TIM Order in Brazil
LM Ericsson Telefon AB has won a US$100 million contract from Telecom Italia Mobile SpA’s Brazilian operating companies TIM Nordeste and TIM Sul for the installation of high-capacity TDMA digital wireless communications equipment in two of their four wireless regions.
CHINA
Cisco and Guangdong Post and Telecom Bureau Sign $200 Million Supply Deal
Cisco Systems has signed a MOR with China’s Guangdong Provincial Posts and Telecommunications Administration Bureau for Cisco to supply equipment worth US$200 million over five years. Under the terms of the agreement, Cisco will also provide marketing support to the bureau. The agreement signifies intent between both parties to cooperate on a wide range of products.
EUROPE
France Telecom Provides $72 Million for $600 Million Submarine Cable Project
France Telecom announced that it will provide a US$72 million share of a US$600 million project to construct a submarine cable which will link Africa to Europe and to Asia following an agreement it has signed with an international consortium.
Olivetti to Appoint Massimo Brunelli as Telecom Italia’s Chief Financial Officer
Olivetti SpA nominated Massimo Brunelli as chief financial officer at Telecom Italia SpA. Brunelli, who was formerly the CFO at ENEL SpA, will take the place of Giovanni Stella, the orchestrator of Telecom Italia’s failed defense against Olivetti’s hostile takeover bid. Stella will remain at Telecom Italia but in the role of manager for acquisitions and retail property. Brunelli’s nomination will be considered by shareholders at their AGM on June 28.
VersaTel Seeks Listing in Amsterdam and Nasdaq Trading
VersaTel Telecom International NV has applied for its ordinary shares to be listed on the Amsterdam stock exchange and on Nasdaq in New York. In addition, the company applied for a simultaneous senior debt placement, and will use the proceeds of the dual operation to refinance the acquisition of data communications provider Svianed BV, to invest in expanding its network, and for working capital and general expenses. The placing of ordinary shares will be led by a syndicate comprising Lehman Brothers, ING Barings, Bear Stearns, Hambrecht & Quist, Paribas and Internet broker E*Trade. Further details of the venture will be provided to the public at a press conference in Amsterdam on July 1.
MEXICO TELECOM
FCC’s Kennard Commends AT&T and Telmex Rate Reduction Scheme
FCC’s Chairman William Kennard yesterday expressed his support for the joint agreement drawn between AT&T and Telmex to lower their international call rates. Kennard sees the agreement between AT&T Corp. and Telefonos de Mexico SA to lower the rates they charge each other on international calls could signal an important victory for US consumers. The deal lower the settlement rate for calls between the two countries to 19 cents a minute by the year 2000 from 37 cents in 1998. In a statement, Kennard said that once the agreement is filed with the commission, interested parties would have an opportunity to comment on it. He urged other US carriers still in talks with Telmex to conclude them promptly so that the commission can proceed with its review of all rate deals between Telmex and the US companies.
SOUTH AMERICA
Telefonica, Telecom Argentina and BellSouth Win Rural PCS Licenses
Telefonica SA, BellSouth Corp. and Telecom Argentina Stet-France SA were among the winners in the auctions of four PCS licenses in rural Argentina. The licenses were sold for $198 million late yesterday. In the north of the country, Telefonica won one license for $56 million and an alliance of BellSouth and Movicom the other for $53 million. In the southern sector, Movicom BellSouth won one license for $46 million and Telecom the other for $43 million. Deputy Economy Minister Pablo Guidotti said income from the auction would be used to help cover a shortfall in tax receipts. BellSouth Corp.’s affiliate Movicom won in a government auction two licenses to provide cellular telephone service to all of Argentina outside of Buenos Aires. Movicom will pay US$99 million for the two licenses, which are subject to regulatory review. Previously, the company won rights to provide cellular service in Buenos Aires, so the two new licenses will enable it to serve the entire country.
Headlines - JUNE 23, 1999
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FCC Approves Vodaphone’s Acquisition of AirTouch
The FCC yesterday granted British-based mobile phone company Vodaphone’s $62 billion acquisition of US carrier AirTouch. In giving their approval of the deal, the agency said that it would not hinder competition since the two companies against each other in the United States. As part of the deal, Vodaphone agreed to sell off its 17 percent stake in German mobile telephone group E-Plus to meet European competition concerns. The combined company plans to develop a global wireless company offering service within the United States and across Europe. It will be capable of reaching nearly 1 billion people in 23 countries. However, the deal may have an adverse effect on AirTouch’s relationship with Bell Atlantic, which lost out in the bidding for AirTouch in January. The baby bell said it plans to end a previous US wireless joint venture it had with AirTouch, but AirTouch says it wants to maintain the relationship. Last month, both the European Union and shareholders of both companies approved the deal.
Qwest Communications Executives to Discuss Possible Revision of Spurned Bid
Yesterday Joseph Nacchio, chief executive of Qwest Communications, met with company executives to discuss a possible revision of their unsolicited bid for US West and Frontier Corp. Executives will meet today to discuss whether to step up their bid for either or both of the companies. Last week Qwest made an unsolicited bid for US West and Frontier Corp. even though both companies had agreed to be acquired by Global Crossing. As a result of their bid, Qwest shares tumbled 25 percent.
General Dynamics to Acquire 3 GTE Units for $1.05 Billion
General Dynamics Corp. will acquire three telecommunications and information units from GTE Corp. for $1.05 billion. With this deal, General Dynamics will more than double its revenue from computer services and electronics sold to government and the military. Included in the deal are GTE’s Communications Systems divisions in Taunton, MA, Worldwide Telecommunications Services in Needham, and Electronic Systems Division in Mountain View, CA. These three units have combined sales of approximately $1.2 billion in 1999, about 70 percent of which will come from the Defense Department.
Texas Instruments to Acquire Israeli-Based Libit Signal Processing for US$365 Million
Texas Instruments will acquire Libit Signal Processing, an Israeli manufacturer of chips and parts for cable TV and set-top boxes, for US$365 million. The acquisition will enable TI to expand its domination of the digital signal processor technologies into all segments of the broadband communications marketplace.
Hewlett Packard Ends Storage System Sale Alliance with EMC
Hewlett Packard has ended an agreement to sell storage systems made by the EMC Corp. as the company inroduces its own competitive products. The companies maintain that the decision to end the agreement came on mutual terms. It will stop selling EMC Symmetrix storage systems by the end of June. In May, the company signed a three-year contract with EMC rival Hitachi Data Systems to supply large storage devices bearing the HP name bundled with HP hardware and software. With this new agreement, EMC and Hewlett Packard will compete for HP customers that currently use the EMC system. During the last quarter, approximately 13 percent of EMC’s revenue came from the Hewlett Packard agreement. HP sees that their new agreement with Hitachi is a better way to gain more of the growing corporate data storage market, which analysts predict will grow to $31.1 billion by 2002.
ASIA PACIFIC
Cable & Wireless Appoints Simon Cunningham President of IDC
Cable & Wireless PLC has appointed Simon Cunningham chairman of Cable & Wireless Japan Ltd., as president of its unit International Digital Communications Inc. Cunningham replaces Taketo Furhata and will manage the Japanese carrier’s daily activities. Stephen Pettit, Cable & Wireless’ executive director responsible for corporate development, was also appointed to the IDC board, which has been reduced to 10 directors.
Ericsson Predicts High Growth in the Asia Pacific Mobile Phone Market
LM Ericsson Telefon AB predicts that the Asia Pacific region excluding Japan to post the largest rise in the number of mobile phone subscribers globally, to just over 300 million in 2004 from around 50 million in 1998. Based on total sales for the first quarter of 1999, China is the company’s largest single market worldwide, accounting for 13 percent, while Japan accounted for 4 percent. Ericsson is also looking to expand its market share in the high-tech countries of the region such as Taiwan, Australia, South Korea and Japan.
BRAZIL
Ericsson will Acquire Further 53 Percent Stake in Brazil’s Matec
LM Ericsson Telefon AB’s Brazilian unit Telecommunicacoes SA acquired a 53 percent stake in the enterprise Solutions Company Matec SA. Ericsson already controls 30 percent of Matec and said it made an offer for the remaining 17 percent.
EARNINGS/STOCKS
3Com’s Fourth Quarter Earnings Beat Expectations
Fueled by steady growth in product development, 3Com Corp.’s fourth quarter earnings beat analyst’s expectations by a penny. For the quarter ended May 26, the company had net income of $87.5 million, or 24 cents a diluted share, up 38 percent from $63.6 million, or 17 cents a share, in the period a year earlier. Sales rose 3 percent, to $1.42 billion from $1.375 billion. It was expected that 3Com would earn 23 cents a share. The company’s yearly earnings were $403.9 million, or $1.09 a share, compared with $30.2 million, or 8 cents a share, in the 1998 fiscal year. Sales for the year were $5.8 billion, up from $5.4 billion.
EUROPE
Alcatel Wins US$9.5 Million Azerbaijani Telecommunications Tender
Alcatel’s Turkish Subsidiary Alcatel Teletas won a US$9.5 million tender to modernize Azerbaijan’s telephone system. Alcatel Teletas, which is 65 percent owned by the Alcatel, will release financing details in the next 10 days, after which work on the network should begin. The company will replace telephone switching systems in nine cities outside the capital Baku as well as improving the network capacity and transmission capabilities.
Deutsche Telekom no Longer Interested in Acquiring One2One
According to a report in the Frankfurter Allgemeine Zeitung, Deutsche Telekom AG is no longer interested in acquiring One2One, the mobile phone unit of Cable & Wireless PLC and MediaOne Group Inc., which is officially up for sale. The company considers the price level reached in the bidding process as too high, citing sources in London as saying that bids have been up to 10 billion stg. This would be too much for the smallest of the UK’s four mobile phone operations, and Deutsche Telekom is not willing to raise its One2One bid. On the other hand, the company is still interested in acquiring Cable & Wireless PLC and Sprint Corp.
France Telecom to Market Long-Distance Phone Services via Hypermarkets
France Telecom will sell reduced priced long-distance telephone services with the prefix 8 through a number of hypermarkets and do-it-yourself chains in partnership with the Cofinoga loyalty card scheme.
INTERNET
PSINet Acquires Privately-Held TIAC
As it continues to expand its presence in the Northeast, PSINet will acquire The Internet Access Co. (TIAC) of Woburn, MA, which serves 33,000 residential subscribers and business customers in Massachusetts, New Hampshire, Connecticut, New York, and New Jersey. Financial terms of the deal were not disclosed. The company, founded in 1994 by Tim Jackson, was one of the first companies to sell Internet access to homes and businesses.
MEXICO TELECOM
AT&T and Telmex Agree to Lower US Mexico Settlement Rates for 1998-2000 Period
Telefonos de Mexico SA de CV and AT&T have agreed to lower the US-Mexico settlement rates for the years 1998 through 2000. Under the terms of the agreement, the settlement rate a carrier pays another for international rates will be lowered. For US to Mexico calls will be lowered to 37 cents per minute for calls made in 1998; to 31 cents per minute for calls made in the first six months of 1999; and to 19 cent per minute for all calls made through 2000. Telmex did not give the earlier rates for the three periods, but indicated they were higher than the new levels.
Headlines - JUNE 22, 1999
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EUROPE
FIBER OPTICS
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New Jersey Approves Bell Atlantic and GTE Merger
The New Jersey Board of Public Utilities voted unanimously to approve the merger of Bell Atlantic and GTE, becoming the 28th state to either approve the transaction or decline to assert jurisdiction over it. Last month, the US Department of Justice granted their approval of the merger, and the shareholder of the two companies approved it. The companies expect to close the merger by the end of 19999 or in the first half of 2000, pending further state and federal reviews.
America Online and Hughes Electronics to Jointly Develop Satellite Internet Access Service
In the effort to expand into the burgeoning broadband sector, America Online announced that it would invest $1.5 in Hughes Electronics Corp. to promote satellite delivery of Internet services. This investment illustrates a growing confidence in satellites as a consumer broadband technology. Currently, only about 40,000 consumers in the US receive their Web access from Hughes satellites, compared with about 750,000 on cable-modem systems such as Excite At Home Corp.’s service. The two companies, which previously joined forces to develop set top boxes, are confident that satellites will some day provide high-speed access to the Internet. The $1.5 billion investment will go into a convertible preferred stock paying 6.25 percent a year in interest for three years. Also, Hughes plans to spend approximately $200 million of the money in online advertising on AOL’s service.
US WEST to Stick with Plan to Merge with Global Crossing
Late yesterday, US West Corp. reconfirmed its commitment to merge with Global Crossing, and that it would not take any action against Qwest’s unsolicited offer. According to a report in the Wall Street Journal the Denver-based Bell would continue to monitor the developments related to Qwest’s offer, but executives expressed concern over the volatility of Qwest’s stock. US West’s decision came just hours after Qwest filed a registration statement that underscored its commitment to proceeding with its proposed purchase of US West. The company is also seeking to acquire Frontier Corp, which was acquired by Global Crossing earlier this year. However, Froniter said it would remain with Global Crossing.
ADC Telecommunications Acquires Saville Systems for $600 Million in Stock
ADC Telecommunications, Inc. will acquire Saville Systems, a provider of specialized billing software, for $600 million in stock. Under the terms of the agreement, which each company’s board of directors approved, each ordinary share of Saville, has approved will be exchanged for 0.358 of an ADC share. At ADC's closing share price of $50.125 on June 18, 1999, the transaction is currently valued at approximately $700 million, with the final value determined by ADC's closing share price at the completion of the acquisition. The proposed transaction is expected to be completed during ADC's fourth fiscal quarter, which ends October 31, 1999, and is planned to be accounted for as a pooling of interests and to be treated as a tax-free reorganization for U.S. federal income tax purposes. After closing the transaction, ADC expects to take a one-time charge for various acquisition-related expenses the amount of which has not yet been determined. As a result of the deal, ADC will create a new Software Systems Division to be comprised of the Metrica, NewNet and Saville business units. This division will operate within ADC's Integrated Solutions Group, which also includes the Systems Integration Division, and will focus on the development, deployment and marketing of ADC's software products. The Software Systems Division will be managed by Lawrence S. Barker, Saville's newly appointed president, who will assume the positions of president of ADC's Software Systems Division and of an ADC vice president upon completion of the acquisition.
Paul Allen and MCI WorldCom to Make Joint $600 Million Investment in Metricom
As competition continues to mount for providing Internet access, Paul Allen and MCI WorldCom announced a joint $600 million investment in Metricom Inc. As a result of the investment, Metricom’s shares rose 44 percent in the market yesterday. As part of the deal, Allen’s investment company Vulcan Ventures Inc. will purchase 30 million new shares at $10 each, and he will maintain his current stake in Metricom once the new stock is converted to common stock. MCI WorldCom will make an equal investment, giving the long-distance company a 38 percent stake. Allen’s investment in the company is one segment of a multibillion spending spree he has conducted over the past year, including large investments in many Internet related companies and the assembling of a significant cable television empire that reaches 5.5 million customers. With this investment, Metricom will be able to launch a national and faster service, which is expected to be available by the middle of the year 2000.
BRAZIL
Telecom Italia Raises Stake in Tele Centro Sul to 38 Percent
Telecom Italia SpA has raised its stake in Brazil’s Tele Centro Sul fixed telephony venture to 38 percent from 19 percent after exercising rights for a total cost of US$110,000.
Telefonica Launches Offer for Minority Holdings in Four Brazil Cellular Firms
Telefonica International SA has launched a public share offer to purchase minority shareholdings in its four regional cellular operations. The offer, launched in conjunction with Iberdrola SA, is aimed at minority shareholders in Telerj Celular, Telest Celular, Telebahia Celular and Telegripe Celular, and pitched at 50 percent above the shares’ current price. The offer was launched after being cleared by bourse authorities and expires on July 1. Senior Telefonica officials said the operation is part of a plan to increase the company’s investments in Brazil.
Celestica will expand its Global Reach into Brazil and Malaysia
Celestica Inc. announced plans to expand its operations into Brazil and Malaysia in response to growing customer demand. In Brazil, Celestica will open a facility in Hortolandia. Strategically located in a technology park, this operation will be fully operational by the third quarter of 1999. In Malaysia, Celestica will establish an operation in Kulim, which will be operational by the fourth quarter of 1999.
Telemar’s Shareholders Inepar and La Fonte to Sell Shares
Inepar SA and La Fonte are negotiating a deal to sell their stake in Brazil’s largest fixed telephony operator Telemar. According to a report in the Gazeta Mercantil financial daily, Inepar plans to sell all of its 10 percent stake, while La Fonte is preparing to sell 3 percent of the 14.5 percent it owns. Telemar is one of the three fixed line companies spun off from Telecomincacoes Brasilieras SA last year in preparation for privatization. The Gazeta said the companies are planning to sell their stake purely because the second installment of 30 percent due from the privatization last July comes due in August. Telemar partners Andrade Gutierez SA, Garantia Partners and Banco do Brasil have expressed interest in purchasing the shares.
EUROPE
Cable & Wireless Repurchases 50 Percent Stake in Securitized One2One for 3.8 Billion stg
Cable and Wireless PLC has repurchased the 50 percent stake in mobile phone operator One2One, which it recently securitized for 3.8 billion stg. The company said that since the May 21, 1999 securitization of the One2One stake, it has obtained clarification on a number of matters including the timing of the completion of the sale of Cable & Wireless Global Marine, the outcome of the bid for IDC in Japan and the sale of Cable & Wireless’ 20 percent interest in Bouygues Telecom.
AOL Confirms Offering of Free Internet Access Service in the UK
America Online has confirmed that it is considering launching a free Internet access service in the UK market. According to an AOL spokeswoman, the company will launch the service if it looks like a sustainable business. Analysts believe that AOL was considering introducing a free access service to counter competition from providers such as Dixon PLC’s Freeserve.
Deutsche Telekom Declines Comment on Report of 180 Million Investment in Cdnow.com
Deutsche Telekom AG refused to comment on a report in a today’s edition of weekly Focus magazine, saying it plans to invest at least 180 million dm in the Pennsylvania-based company CDnow, the world’s largest Internet shop for CD music.
Telefonica’s TPI Prices its Institutional Tranche Public Share Offer at 15.0 Eur
Telefonica SA said the price for the institutional tranche of its public share offer of up to 35 percent of its Telefonica Publicidad e Informacion SA unit has been fixed at 15.0 eur. The final price for the retail tranche has been fixed at the maximum 14.75 eur. The offer was 33.4 times subscribed, with the retail tranche 7.14 times subscribed and the institutional one 57 times. The shares will begin trading on June 23, 1999.
FIBER OPTICS
GST Telecommunications Enters into $62.5 Million Strategic Network Agreement with Williams Communications
GST Telecommunications Inc. has signed its third major agreement with Williams Communications Group in which Williams will purchase multiple conduits on GST’s California Long Haul network between Sacramento, Oakland, San Jose, and Los Angeles. Under the terms of the agreement, Williams will acquire multiple conduits on approximately 800 route miles comprising several segments along GST’s West Coast backbone between Sacramento, Oakland, San Jose, and Los Angeles for about $62.5 million.
Headlines - JUNE 21, 1999
TOP STORIES
ASIA PACIFIC
BRAZIL
EUROPE
MEXICO TELECOM
WIRELESS
TOP STORIES
Sprint will Begin Selling ION Network to Residential Customers this fall
In the effort to gain a place in the broadband market, Sprint will begin selling its ION network to residential customers. The long-distance carrier will begin an initial roll out of its Integrated Online network this fall to residential customers in Denver, Kansas City and Seattle. The ION service is a bundled package of telephone, Internet access and videoconferencing via one pipeline to the home. Currently, the ION service, which was launched last year, serves business customers. However, Sprint representatives will not disclose how many businesses uses the service. The service will be delivered to residential homes via Sprint’s digital subscriber lines. Even with its own DSL lines, the long-distance carrier will still be obligated to pay access fees to the local Bell companies. To bypass the Bell system, Sprint has invested $1 billion to acquire several wireless-cable companies, but analysts argue the strategy is largely unproven and will be expensive to deploy. Although the service offers consumers a broad range of features including multiple phone lines, unlimited long-distance service, interactive games and high-speed Internet access, it will be very expensive. It is estimated that the service could cost anywhere between $100 to $150 plus installation and equipment.
Qwest Communications and KPMG to Launch Joint Internet Services Venture
Qwest Communications and KPMG announced today that they would enter a joint partnership to sell Internet-based business services. After it had formed a relationship with KPMG, Qwest on Friday informed the Securities and Exchange Commission that it was switching its accounting form from KPMG to Arthur Anderson LLP. Those close to the deal say that the switch in accounting firms, only one week after the company made an $55 billion bid to acquire both Frontier Corp. and US West, is due to the new alliance and does not indicate friction between the companies. During the past few months, Qwest has been looking for a new partner to sell systems-integration work to multinational businesses. These services, which many business are looking to outside firms to perform, are one of the fastest-growing sectors of telecommunications. Other companies such as MCI WorldCom have made an entrance into this field through a partnership with Electronic Data Systems.
Cisco Completes Acquisitions of Fibex Systems and Amteva Technologies
Cisco Systems has completed the acquisitions of Fibex Systems of Petaluma, CA and Amteva Technologies of Glen Allen, VA. On April 8, 1999 Cisco announced that they would acquire Fibex, a pioneer in Integrated Access Digital Loop Carrier products and devices that combine traditional voice services with data services using ATM as the underlying architecture. And on April 28, 1999 the company announced that it would acquire privately held Amteva Technologies, a provider of middleware, which provides a unified means for enabling voice mail, fax, and e-mail messages over an Internet Protocol-based network.
ASIA PACIFIC
Siemens to Deliver UMTS Mobile Telecommunications System to NTT DoMoCo
Siemens AG’s information and communications networks division announced that it would provide mobile network operator NTT DoCoMo of Japan the world’s first Time Division Duplex mobile telecommunications system. The system comprises base stations, switching systems and terminal devices for a mobile phone network based on UMTS. Siemens and NTT DoMoCo intend to jointly push further the development of the system and its future applications, which will run for a year beginning in 2000.
IDC Survey Says PC Sales are up 25 Percent Asia-Pacific First Quarter
According to a survey by International Data Corporation, sales of personal computers in the Asia Pacific region, excluding Japan, reached 2.95 million units in the first quarter of 1999, a 25 percent increase year-on-year increase. Sales were 2 percent higher than in the fourth quarter of 1998 and the highest year-on-year increase since the second quarter of 1996. Gains were supported by growth in key countries such as China, Australia, India and Taiwan. IBM maintained its lead in the regional market share with shipments of roughly 259,000 units, a 49 percent increase from the same period last year. Compaq was in second place with 223,400 units shipped, up 7.5 percent from last year, and Legend remained in third place. By country, China received more than 1 million units in the first quarter, the largest market share in the region.
BRAZIL
Lucent Purchases Two Brazilian Switch Manufacturers; Wins Order from Brazil’s Telemar
Lucent Technologies has purchased Batik Equipmentos SA and Zetak Tecnologia SA, which are both Brazilian manufacturers of telephone switch equipment, for an undisclosed amount. Also, the company has received a major order for switching and access equipment from Brazilian telecommunications provider Telemar. Terms of the Telemar order were not disclosed, but Lucent said it call for it to provide equipment to support 1 million fixed lines in the Telemar system.
EUROPE
British Telecommunications to Acquire Complete Control of New Zealand’s Clear
British Telecommunications will acquire a 100 percent control of New Zealand’s number 2 telephone company, Clear Communications. BT, which already holds 25 percent stakes of Clear, is purchasing separate 25 percent stakes held by MCI WorldCom, government-owned Television New Zealand and by privately held Todd of New Zealand. Terms of the deal were not disclosed.
Telecom Italia will not exercise Right to Purchase 20 Percent Stake in Bouygues Telecom from Cable & Wireless
Telecom Italia SpA announced that it will not exercise its option to purchase a 20 percent stake in Bouygues Telecom SA from Cable and Wireless PLC. Telecom Italia’s option to purchase the stake expired on Saturday. In April 1998 Cable and Wireless said Telecom Italia would be purchasing the stake for 456 million stg to cement their intended alliance, but the partnership was abandoned in November. A spokesman for the Italian PTT commented that the conditions for the sale set by C&W were uninteresting; however, Telecom Italaia remains very interested in the French telecommunications market where it runs its fixed mobile operations.
Italy’s Treasury Ministry to Propose Domenico Siniscalco to the Telecom Italia Board
Italy’s treasury ministry announced that it plans to appoint ENI SpA Mattei foundation director Domenico Siniscalco to the Telecom Italia board of directors. Currently the treasury ministry retains a 3.46 percent stake in Telecom Italia.
France Telecom Unit Expects to Earn 13 Billion Ptas in Sales from its Catalunya Operations
France Telecom unit Lince Telecommunications SA has forecasted that sales of the unit would reach about 13 billion ptas in Catalunya within two years. The group was awarded the privatization of a 75 percent stake in Catalana de Telecomunicacions, Societat Operadora de Xarxes SA for 8.216 billion ptas. The Catalan government will retain a 25 percent stake in the operator. Lince will invest 48 billion ptas in the service Uni2 in the next 10 years. Uni2 managing director Maurice Bordas said the unit plans to carry out a capital increase of 5.060 billion ptas next month to finance the acquisition.
MEXICO TELECOM
Competitors Demand Regulations be imposed on TELMEX
Telefonos de Mexico rivals demand that regulations be placed on the former state telephone monopoly, despite a Mexican judge’s injunction against an antitrust ruling that Telmex is a dominant carrier. The competitors, which include companies backed by AT&T and MCI WorldCom said last week’s injunction allows for additional regulations that are deemed in the public interest. On Friday, the carriers urged the Mexican telecommunications regulator Cofetel, to impose additional regulations as soon as possible, with the objective of protecting the public interest and promoting strong competition. Neither Cofetel nor Telmex would comment on the judge’s injunction, which overturned a March 1998 ruling that Telmex had monopoly powers.
WIRELESS
3Com Corp and Aether Technologies Form Wireless Data Service Company OpenSky
3Com Corp. and Aether Technologies have formed a joint company called OpenSky. OpenSky will deliver wireless data services that allow users to securely access their primary e-mail address, extract critical information from the Internet and corporate intranets, and share their schedules remotely through any Palm computing platform device, Windows CE device, pager or WAP-enabled phone. Each company will hold stakes in the new company, which will be based in Palo Alto, CA. Patrick McVeigh, former vice president of worldwide sales for 3Com’s Palm Computing division, will be president and chief executive of OpenSky. |
