Telekom sells cable units

June 21, 2001 Posted: 1126 GMT

NEW YORK (CNNfn) -- Deutsche Telekom said Thursday it has agreed to sell six German cable TV companies to U.S. cable network operator Liberty Media in a deal that could bring a reported $4.7 billion, or $400 million more than earlier projections.

Liberty Media (LMG.A: Research, Estimates), which is due to be spun off from U.S. telecom service provider AT&T (T: Research, Estimates) in August, will gain access to the world's second largest TV market after the United States.

Deutsche Telekom (DT: Research, Estimates) said that subsidiaries Deutsche Telekom Kabel-Services and MediaServices will also be fully taken over by Liberty. No terms were disclosed as detailed negotiations continue, Telekom said.

The Wall Street Journal reported Thursday that the price could top $4.7 billion, up from an earlier $4.3 billion estimate published by the Financial Times. The FT said that price of the transaction had been a sticking point in the negotiations, with Liberty seeking a lower price.

A consortium led by Liberty began seeking a $2.5 billion, 55 percent stake in the companies in February. The FT said that Deutsche Telekom was required by the European Commission to dispose of controlling stakes in nine regional cable units for competitive reasons.

Deutsche Telekom also has come under increasing pressure to sell off to cable networks in order to cut debts of 57 billion, built up when it bought new high-speed wireless permits in Europe last year

As part of the deal, Liberty Media is granting Klesch & Company Ltd. an option to acquire up to 24.9 per cent interest in the German cable activities. Liberty and Klesch already control Amsterdam-listed Pan-European Communications, Europe's biggest TV network provider.

Liberty Media, acquired by AT&T as part of its purchase of cable operator Tele-Communications Inc. in 1999, is run by former TCI chairman John Malone. It is being spun off as part of a reorganization of AT&T.

Liberty Media class A tracking stock closed up 59 cents to $16.65 in Wednesday trading, while its class B shares gained 57 cents to $17.60. Shares of Deutsche Telekom gained 0.99, or 4 percent, to 25.24 in trading in Frankfurt Thursday.

	Prices reflect trading in Deutsche Telekom's American depositary shares.

Liberty owns stakes in cable stations such as Starz Encore Group, Discovery Communications Inc., QVC, Court TV and USA Networks (USAI: Research, Estimates). It also holds interest in major media companies including AOL Time Warner Inc. (AOL: Research, Estimates), the parent of CNNfn, and News Corp. (NWS: Research, Estimates). It has been seeking to expand its penetration in Europe, which lags the United States in the development of broadband services -- voice, data and video -- that can be sent over upgraded cable TV lines.

The six regions of Germany covered by the cable systems included in Thursday's deal have 10 million cable television customers.

Nationwide, about 18 million Germans have cable, but only about a third of them have contracts directly with Deutsche Telekom systems, according to the Wall Street Journal, with the rest hooked in through what are known as Level 4 operators. Liberty is also buying the Level 4 operators in the six regions, a move that German competition regulators would not allow Deutsche Telekom to do, the Journal reported.

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