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BT ups Viag cellular stake
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August 17, 2000: 5:56 a.m. ET
But British Telecom stock sinks to 22-month low after sealing $6B deal
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LONDON (CNNfn) - British Telecommunications PLC said Thursday it would raise its stake in German mobile phone venture Viag Interkom to 90 percent by acquiring 6.65 billion euro ($6.04 billion) worth of shares from its partner E.On.
The agreement marks BT's third major recent acquisition, following deals in the Netherlands and Ireland. But investors, worried about the U.K.'s firm's mounting debt to finance its purchases, sent British Telecom shares tumbling more than 3 percent, pushing the stock to its lowest level since October 1998.
BT, which already owns 45 percent of Viag Interkom, will buy another 45 percent stake from E.On (FEON), a conglomerate created by the June merger of German utilities Veba and Viag that has been shedding non-core assets to focus on its energy holdings. Earlier this month, E.ON announced it would sell its electronics unit to a European-U.S. consortium for about $2.35 billion ( 2.6 billion) in cash and assumed debt.
Munich-based Viag Interkom is bidding for a next-generation cellular-phone license in Germany, a potentially lucrative investment that would allow it to offer high-speed Internet service and video transmission over mobile phones.
BT will control 90 percent of the five-year-old venture after E.On's shares are purchased, and can buy the additional shares through July 2001.
BT said the Norwegian state telecom operator Telenor, which has a 10 percent stake in Viag Interkom, supports the agreement. Telenor has made no decision to sell its shares, but has the option to sell its stake or BT "may decide to buy it in due course."
BT Chief Executive Peter Bonfield said the deal was part of the company's strategy to position itself as a dominant player throughout Europe.
"With the recent increase in our ownership to 100 percent in the Dutch operator Telfort, and our position alongside Telenor in Esat in Ireland, together with our other interests, we are clearly demonstrating that Europe is BT's home market," he said.
In late morning trading in London, BT stock slipped 2.7 pence to 796 pence. BT shares have lost about 50 percent of their value since the beginning of the year. E.On shares fell 2.55, or 4.3 percent, to 56.55 in Frankfurt.
E.On operating profit dips
Meanwhile, E.On reported a 10 percent slide in first-half operating income, to 1.71 billion, as operating profit from its electricity unit fell 33 percent amid a continuing drop in electricity prices.
Pretax income surged 57 percent to 5.66 billion, benefiting from one-time gains from the sale of the company's stake in phone carrier E-Plus and Swiss cable TV operator Cablecom.
First-half 2000 sales climbed 34 percent to roughly 46.9 billion.
The company said full-year 2000 operating results would be lower than record results in 1999, citing the fall in electricity prices. 
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British Telekom
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