US Regulator Investigating T-Mobile Shareholding

Deutsche Telekom is facing an investigation into its ownership of T-Mobile USA which could potentially result in the company being forced to sell a stake in the firm. The investigation was sparked by the pending merger of Verizon Wireless and Alltel, which has prompted the US telecoms regulator, the FCC to take a look at foreign-controlled assets held by the companies.

The Wall Street Journal has seen a letter sent to T-Mobile USA last month stating that the company may be in breach of regulations limiting foreign ownership to 20% of a US telecoms operator.

The letter, obtained by Dow Jones (owner of the WSJ), said, "T-Mobile USA's level of foreign ownership through the existing ownership structure appears to be in violation" of the 20% limit.

"The Commission strictly applies the 20% statutory benchmark of [the law], and has no discretion to waive it," the letter said. "Based on this ownership structure it appears that Deutsche Telekom, a foreign corporation, has a 30%, non-controlling interest in a common carrier license."

Both Deutsche Telekom and Vodafone were granted permission to take large stakes in US firms under waivers granted by the regulator.

Back in 2001, when Deutsche Telekom brought VoiceStream, there had been concern at the time that the takeover would not be approved as the German government owned 44% of Deutsche Telekom, and the FCC could have block any move by a company that is more than 25% owned by a foreign government. USA anti-trust authorities and the Federal Bureau of Investigation had previously cleared the takeover after investigating the security implications. The FCC also approved Deutsche Telekom's purchase of another GSM1900 network, Powertel at the same time.

At the time of the purchase, Deutsche Telekom did say that it planned to float the company back onto the stock market eventually.

T-Mobile officials said they are still mulling their response to the FCC's letter, but added they are open to simple restructuring to solve the problem. They also said they believe T-Mobile's current corporate structure passes legal muster.

On the web: Wall Street Journal

Posted to the site on 3rd November 2008