Deutsche Telekom Cable Sale Takes Shape

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Frankfurt, Germany -- Deutsche Bank A.G., thecountry's largest bank, is believed to have offered 9 billion deutsche marks ($US5.33billion) to take over one of the world's largest cable operators -- the systemsassets of Deutsche Telekom A.G.

Deutsche Bank declined to comment on the rumor, whichcoincided with details of how Telekom will sell off its systems in 1999. Telekom last weeknamed British investment bank N.M. Rothschild as its advisor on the sale.

Telekom plans to regionalize its massive cable-systemsoperation and then take on German and foreign investors with those regional operations.The negotiations are going slowly because Telekom is believed to have valued its systemsat DM12 billion to DM13 billion (about $US7 billion). Telekom lost DM1.3 billion ($US770million) on its cable operations in the last year.

The new Deutsche Bank rumors aren't a big surprise.Other speculation about its interest in the operations surfaced earlier this year, whenOlaf Castritius, who was in charge of the cable business at Telekom's directcompetitor in telephony, Communications GmbH & Co., moved to a high-levelposition at Deutsche Bank.

It now appears that Deutsche Bank is interested inacquiring the Telekom stakes with partners that would hold stakes in the systems andoperate them. However, that plan seemed to contradict what Telekom has detailed about itsplans for the sale.

At a recent press conference in Berlin, Telekom boardmember Gerd Tenzer stated that after the reorganization of Telekom's ownership, therewould be six to eight regional operations, with each centering on a major region, such asthe Berlin-Brandenburg area.

It also seemed unlikely that Telekom would be allowed tosell its stakes to one player, such as Deutsche Bank, because the European Commission hasexpressed concern about one company emerging from the sale with too much power.

Tenzer said the new structure of regional operations wouldbe in place after the New Year.

While the plans come into shape, Telekom is busy upgradingits systems.

Telekom and the city of Berlin announced at the recentpress conference that the Berlin-Brandenburg region will be the first in Germany to beupgraded for more services. Over the coming year, 600,000 of the estimated 1.3 millioncable homes in Berlin will be upgraded from 450 megahertz to 862 MHz, which will doublethe number of channels carried on the system. In addition, 1,000 homes will be equippedwith a return path.

Berlin is trying hard to become the first cable system soldby Telekom, in order to speed up the development of multimedia businesses in the region.Parties such as Microsoft Corp. and some banks were named as the top candidates topurchase that system.