Veba, Rwe Plan 3bn Alliance

The alliance signals the end of talks initiated earlier this year between British Telecommunications and RWE, which would have led to the German groups becoming a member of BTs alliance with Viag, the Munich-based conglomerate.

RWE will pay a net DM2.5 billion for a stake of about 37.5 per cent in the new company. It will contribute its extensive telecom assets which include the largest privately-owned network in Germany comprising 70,000 km of modern optical fibre cabling.

RWE and Veba together operate private networks which cover most of Germany.

Vebacom, Vebas telecoms subsidiary, is expected to hold 60 per cent of the holding company which will manage the joint venture, bringing with it Cable and Wireless, the UK-based telecoms group with which it forged an alliance 18 months ago.

 

The share prices of RWE and Viag moved sharply yesterday reflecting analysts views of the earnings potential of the German telecoms market after liberalisation on January 1, 1998.

RWEs share price rose DM2.22 to close at DM60.12, up 3.8 per cent, while Viags shares fell DM26.20 to DM578.20, a 4.3 per cent drop. The changes of allegiance took the industry by surprise, although RWEs failure to conclude a deal with Viag and BT had spurred rumours that the talks were in trouble.

The shake-up leaves BT in a considerably weaker position in Europes largest market. BT brushed off the setback and said it would sustain its alliance with Viag, which will bid for Germanys fourth mobile phone licence next week. Talks between RWE and BT collapsed because the German group was not convinced that BT was seriously committed to the German market, RWE said.

BT said it had decided the talks had no future because RWE was committed to establishing separate fixed wire and mobile phone operations, which, BT said, would have called for substantial new investment in infrastructure.