Deutsche Telekom still scouring for aquistions

Licking its wounds from its failed bid to merge with Telecom Italia, Deutsche Telekom yesterday said it will nonetheless pursue its goal of acquiring or merging with another firm to become an international player.

DT's board of directors says it stands behinds Chairman Ron Sommer's strategy.

Amid tough global competition size will play a decisive role, and it is a clear goal of DT to reach the necessary size through mergers and acquisitions, the board says.

The German carrier lost the chance to merge with Telecom Italia after hostile bidder Olivetti gained a majority control in the Italian carrier. Confirming what a spokesman said to IDG News Service, DT says it is now analyzing its alternatives in light of the changed situation.

The proposed merger with Telecom Italia has shown that DT is ready to take the necessary measures to become an international player. "It is under no circumstances the only way for Deutsche Telekom to reach its goal," the carrier said.

The board's show of support for DT's chairman comes as he faces criticism that he miscalculated the Telecom Italia bid and damaged the carrier's relationship with its alliance partner, France Telecom .

DT is a member of Global One, an alliance with FT and Sprint. The German and French carriers own a 2% stake in one another, but the relationship has become quite chilly since the attempted merger with Telecom Italia. FT is launching a suit against the German carrier for breech of contract.

"Deutsche Telekom's internationalization strategy was and is not directed against France Telecom," the DT board says.

DT's goal of reaching the necessary critical mass to compete on an international basis was not fulfilled with its French partner. "This was not possible under the framework established with France Telecom," DT says. The carrier maintains that it is still continuing the Global One alliance.

Nevertheless, Global One users reportedly have been shortening their contract commitments as they anticipate a likely restructuring of the company.

Sommer is likely to face some heat from investors at the carrier's annual shareholder meeting in the city of Cologne.

Mannesmann, which owns one of DT's strongest competitors, the carrier Mannesmann Arcor, is now much better positioned in Italy's telecommunications markets as a result of the deal. Olivetti is selling Mannesmann its stakes in mobile carrier Omnitel and fixed-carrier Infostrada.

The DT board defended Sommer in the statement by pointing out that the company retains its position as "the leading telecommunication carrier in Europe" based on revenue, customer base and cash flow.

As a result of Olivetti's success, DT shares fell roughly 1.50 euros ($1.60) to about 35 euros.

Network World Senior Editor David Rohde contributed to this story.