DeustcheTelekom, Sprint Said in Talks

F R A N K F U R T, Germany,  July 3 -- — Deutsche Telekom AG was reported today to have held preliminary merger talks with Sprint Corp.

But any deal faces political opposition in the United States. On Capitol Hill today, 30 senators voiced opposition toforeign government-owned companies taking over domestic telecommunications businesses. In a letter to the head of the Federal CommunicationsCommission, Sen. Fritz Hollings, D-S.C., and 29 other lawmakerssaid acquisitions by government-owned foreign firms raise seriousnational security concerns and “would be putting domesticcompetitors at the mercy of a foreign government. No country shouldallow this.”

They urged FCC Chairman William Kennard to heavily scrutinizeany such deals brought before his agency.

The response comes after antitrust regulators in the U.S. and Europe came down in opposition to a $120 billion bid by WorldCom Inc. for Sprint.

Interest in U.S. Market No Secret

With that deal apparently dead, Deutsche Telekom entered informal talks with Sprint, according to a report in today’s Financial Times newspaper.

A Deutsche Telekom spokesman declined comment on the report.But it’s no secret that Deutsche Telekom, a former state telephone monopoly that is majority owned by the German government, is looking at expansion in the U.S.

Communications law prohibits the FCC from approving acquisitionsby telecommunications companies that are more than 25 percentforeign government owned. However, the commission can waive thislimit if it determines that the deal is in the public interest, anda recent telecommunications agreement suggested that the limitcould be overridden if the foreign government was a member of theWorld Trade Organization. Hollings introduced legislation last week that would essentiallytake away the FCC’s latitude in this area. The measure would forbidany foreign company owned more than 25 percent by its governmentfrom taking over a U.S. telecommunications business. The lawmakers asserted that they are not opposed to investmentby foreign companies, but believe an outright acquisition by agovernment-owned entity could thwart the competitive market in theU.S. They also fear that such deals could give foreigngovernment’s access to the U.S. telecommunications infrastructure,compromising national security.