Foundation

World2000 141from the US Department of Justice and the EuropeanCommission. The American authorities saw this merger as aserious danger to maintaining competition on the longdistancemarket, while the European bodies were especiallysensitive to the 60% international Internet traffic market share(in fifty countries) that this new marriage would represent.• Lucent announces the imminent spin-off of its microelectronicactivities representing a turnover of around $4billion. The new entity, grouping together the integratedcircuits and electronic components divisions, should lead to a20% floatation during the first quarter of 2001, with theremainder of its capital being distributed among Lucent'sshareholders. Although Nortel has initiated talks with Corningto pool their optronics activities and Alcatel may be creatingtracking stocks for its optical component activities, this sectoris still particularly unsettled.• After extremely long negotiations an agreement is now takingshape between Vodafone AirTouch and BT for control ofSpain's second-largest mobile operator Airtel, whichaccounts for 1/3 of the national market with 5.7 millionsubscribers in March 2000 and has a UMTS licence. Thisagreement will make Vodafone majority shareholder with a65.3% stake (21.7% already owned plus 30.46% bought upfrom the BSCH bank, and the remainder from otherinstitutional investors). After this transaction, BSCH shouldown nearly 2.7% of Vodafone.• France Telecom successfully floats 9.7% of its shares in itsWanadoo subsidiary in a difficult context. Representing aturnover of 810.4 million euros in 1999 for a profit of 39.6million, this company groups together France Telecom's verylucrative directory publishing activities as well as its greatloss-making ISP business (1.8 million subscribers) and stillmarginal portal and e-commerce activities. To make sure thatWanadoo's flotation went well, the subsidiary was valuedbelow the 20 billion-mark, which still places it in secondposition in Europe behind T-Online and ahead of TerraNetworks.• BskyB becomes the majority shareholder in Open TV afterbuying up HSBC and Matsushita's stakes for £394 million(BT stays at 19.9%). The platform is valued at 1.92 billioneuros.• The Oxygen project that was supposed to lead to thedeployment of a gigantic world-spanning optical network(328,000km-long, touching down in 171 countries in 265places) between now and 2003 is abandoned. The initialbudget for the project was estimated at nearly $15 billion.• In consistency with the Liberty Media (controlled by AT&T)and UGC/UPC alliance, the two high-speed cable accessservices, Home and Chello are going to merge their activitiesoutside the United States. 13.5 million homes have access toExcite@Home in ten countries (outside USA) and Chelloboasts close to 170,000 subscribers on UPC networks mainly(10.5 million homes) and in Europe. The new 50/50 venturecreated by Excite @Home and UPC, estimates its initialsubscriber base at 300,000. Its shareholders will provide itwith 400 million euros and the company should have beenfloated on the stock market before the year is out. Backed byAT&T and valued at around $6 billion, the structure shouldprove to be a challenger for T. Online, Wanadoo and TerraNetworks.• Deutsche Telekom takes up initiative again in the UnitedStates by announcing its cash-and-swap purchase ofVoiceStream, the last independent mobile operator acrossthe Atlantic. Created from a spin-off of Western WirelessCorp in 1999 and later acquisitions of Aerial Communicationsand Omnipoint, VoiceStream has the particularity of being theleading GSM-standard mobile operator in the US. With 19%and 7.9% respectively, Hutchison Whampoa and the Finnishcompany Sonera are VoiceStream's majority shareholders.In view of the fact the number of subscribers did not exceed2.3 million and that the transaction was estimated at $53billion (including a $5 billion debt takeover) when theannouncement was made, this was a record-breaking dealwith a subscriber valuation of over $20,000…• After difficult negotiations and with the start of the UMTSlicence award process looming in Italy, Deutsche Telekomwithdraws from the operator Wind in this country. Its twoformer partners France Telecom and Enel takeover its 24.5%stake thus boosting their capital in the third-biggest Italianmobile operator (2.779 million subscribers) to 43.37% (18.9%for 2.09 billion euros) and 56.63% (+5.6% for 0.62 billioneuros) respectively.• Lucent acquires Sprint Tide Networks, the switch andnetwork equipment specialist for $1.3 billion.• Auctions for the 5 UMTS licences closes in the Netherlandsafter Viatel, one of the 6 bidders, pulls out. In the end theseauctions only raised 2.68 billion euros. Licences wereawarded to Libertel (Vodafone-Airtouch) for 713.8 millioneuros, KPN Telecom for 711.07 million, Dutchtone (FranceTelecom) for 435.63 million, Telfort (BT) for 430 million, andthe consortium uniting Belgacom/TeleDanmark andDeutsche Telekom. The multiplication of mergers(Mannesmann/Vodafone, Orange/France Telecom), andalliances (like KPN/Hutchison/DoCoMo or Teledanmark/DT))is putting a damper on competitive strategies and highrevenues from auctions. Once market differences have beentaken into account, these licence-awards will have brought infar less than auctions in Great Britain or the licence feesaccompanying the "beauty contest" in France.• The Polish government confirms it decision to award 35% ofthe operator TPSA's capital to the bid headed by FranceTelecom. France Telecom will have to lay out 3.2 billion euros(25% shares) and its partner – the Jan Kalezyt Group - 1.4billion. The two partners should be increasing their share ofcapital in TPSA (up to 51%) in two stages planned for theyear2001. TPSA, which manages ten or so million fixed lines anda million mobile lines, posted a turnover of 3.17 billion eurosin 1999.• Nortel takes the offensive again by acquiring AlteonWebsystems Inc, one of the leaders in data accelerationdevices for Internet servers for $7.2 billion (share swap).Although Websystems Inc still has a modest turnover - $51.5million for the last quarter - it is expanding rapidly.August 2000• Cisco pushes on with its external growth strategy by takingcontrol of IP Mobile in a deal estimated at $425 million (shareswap). Established in 1999, IP Mobile employs 81 staff andis specialised in the development of the wireless IP accesssystems that will form the core of 3G mobile systemmanufacturers' expertise. This acquisition, demonstratingCisco's ambitions in the mobile domain at the time of a newgeneration of IP-orientated services, is the 16th since thebeginning of the year. It followed the purchase of NuSpeedInternet Services ($450 million) and Netiserve ($210 million)a few days earlier.• As a result of its merger with GTE, preceded by the one withVodafone-AirTouch, Bell Atlantic – now called Verizon - sellsseveral of its mobile networks in the regions of Chicago andCincinnati, representing licences for a population of 16 millioninhabitants, for $1.4 billion. The sale went to a BGV© IDATE www.idate.fr