It's hard to tell if VoiceStream Wireless is trying to help or scuttle its proposed buyout by Deutsche Telekom. VoiceStream says it plans to buy Powertel Inc., another U.S. wireless carrier, in a stock deal valued at $5.75 billion.
The idea of a German company buying a significant stake in the domestic voice market has prompted the U.S. Congress to consider legislation effectively killing the planned acquisition of VoiceStream by Deutsche Telekom. If VoiceStream picks up Powertel, it gains customers in 12 Southeastern states, 245 million points of presence, and almost complete national coverage.
In swallowing Powertel, a step that itself is up for shareholder and regulatory approval, VoiceStream could go head-to-head with national carriers, says independent telecom-industry analyst Jeffrey Kagen. The buyout agreement calls for Powertel shareholders to receive 2.64 shares of Deutsche Telekom for each Powertel share. The deal is expected to close after Deutsche Telekom's acquisition of VoiceStream closes.
But Kagen doesn't foresee VoiceStream/Powertel stealing a significant share of the U.S. wireless market. "I don't think they will be a big challenge to AT&T, Sprint, or Verizon unless they turn on their marketing engine," Kagen says. "Their significant advantage will be in one sliver of the market: international travel."
Both VoiceStream and Powertel use the Global System for Mobile (GSM) communications standard, the predominant wireless system used in Europe. Other U.S. wireless companies have yet to support GSM