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$10B cable auction ends
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August 20, 1999: 10:24 a.m. ET
Deutsche Telekom sells stakes in world's biggest cable operator
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LONDON (CNNfn) - Bids closed at midday European time Friday in the auction of the world's largest cable television operator. Deutsche Telekom is auctioning stakes in its nine regional networks, valued at around $10 billion.
The telecom operator wouldn't disclose financial terms of the various bids, although a spokesman said it would give an update on some of the details, without revealing the names of the bidders, within a week.
Telekom's network reaches 17.5 million subscribers, although only 6 million of them are directly connected to its network.
"Germany is the key market in Europe," commented analyst Iain Johnston of JP Morgan, "it has a high level of per capita income and [the network carries] a large proportion of business, and therefore valuable, traffic."
JP Morgan values each direct subscriber at $1,400.
The German telephone giant is being forced to sell majority stakes in the business by regulators concerned with the former state-owned monopoly's market dominance. Telekom wants to keep a holding of around 25 percent in each network, which would give it the right of veto over management decisions.
A Telekom spokesman confirmed the bidders vary from those who want to buy the whole network to some who want to purchase only some of the regional operations. Telekom hopes to complete at least one of the deals by the end of the year
Heading the queue of bidders are several U.S. companies, including Microsoft (MSFT), General Electric (GE) and a group headed by U.S. investor Richard Callahan that includes BankAmerica (BAC).
Other interested parties include a raft of investment vehicles from both sides of the Atlantic, as well as European industrial groups such as Netherlands-based cable operator UPC, German telecom operator Mannesmann (FMMN), German cable television operator EWT/TSS Group and German components manufacturer Robert Bosch. Deutsche Bank also is expected to be in the bidding.
Although Telekom previously indicated it was seeking a price in the range of $10 billion, although analysts say it is very difficult to place a value on the company, given the uncertainty over the worth of the indirectly connected subscribers.
Telekom board member Gerd Tenzer told the Wall Street Journal, "In those areas where we don't have direct access to the customer we'll have to accept a discount."
The network needs significant investment to convert it to current state-of-the-art digital technology allowing interactivity and Internet access. Some estimates have calculated the upgrade could cost $2.5 billion, although JP Morgan's Johnston said that figure "looks a little light." 
-- from staff and wire reports
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Deutsche Telekom
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