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Deutsche Telekom returns internet unit to the fold

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Deutsche Telekom is buying back its internet unit, spun off as a separate company in 2000. DT is offering shareholders in T-Online €8.99 in cash for each share, valuing the unit at just less than €3bn. Most share holders are expected to exchange T-Online shares for shares in Deutsche Telekom. T-Online floated in April 2000 for €27 per share.

The telco says it no longer makes sense to have a separate unit for internet services. The deal will allow it to offer better bundled offerings of internet access, voice calls and TV services. Convergence means that the two firms would end up competing for customers.

Kai-Uwe Ricke, CEO of Deutsche Telekom, said: "Broadband has revolutionized fixed-line-based Internet business. We are in the middle of an ever increasing convergence of telecom and Internet service provider business models. This progressive merging also means that from a customer perspective - and that is the only gauge relevant for us - the Internet is losing its status as a separate, independent business segment." He said the deal was not about cuttting jobs but about expanding fixed line/broadband services.

Deutsche Telekom's supervisory board approved the merger plan on Saturday.

The deal does not mark the end of the company's ambitions. Sources told the Daily Telegraph the newly merged firm would be looking for more acquisitions and named AOL and Tiscali as possible targets. The firm has cash reserves of €4bn to fund further acquisitions.

Shareholders are unlikely to stop the deal because under German corporate law the deal goes through automatically once DT acquires 75 per cent of shares.

The full statement is available in English here. ®

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