If Deutsche Telekom completes the VoiceStream purchase, Powertel shareholders will get 2.6353 Deutsche Telekom shares, worth $106.41, or 31 percent more than Monday's close. The stock is worth $5.9 billion. The German company will also assume about $1.25 billion in debt.
The purchase will give Deutsche Telekom, which is buying Bellevue-based VoiceStream for $46.2 billion, 727,000 customers in the southeastern United States, where VoiceStream owns licenses but lacks its own network.
VoiceStream said the purchase would eliminate fees that it pays Powertel to carry calls into the region that includes Atlanta, reducing its operating costs as competition intensifies.
"If Telekom can expand further in the U.S. by paying less for smaller companies and compensating for what it's paying for VoiceStream, then things look good," said Fabrice Farigoule, an analyst at Bankhaus Metzler.
Deutsche Telekom shares rose 0.55 euros to 44.85 euros, valuing the German company at 135.6 billion euros ($122.1 billion). Powertel shares, which have fallen 19 percent so far this year, fell $5.56 to $81.06. VoiceStream fell $1.13 to $117.06.
If Deutsche Telekom's offer for VoiceStream is terminated, VoiceStream will proceed with the Powertel acquisition on its own, offering stock worth about $4.75 billion, it said.
VoiceStream is paying $7,800 to $9,900 per Powertel customer, substantially less than the roughly $17,700 that Deutsche Telekom has offered for each VoiceStream customer, based on Friday's value for the transaction.
Concern that the German company is paying too much for VoiceStream has helped drive down its stock by almost a fifth since the agreement was announced July 24.
The company, headed by Ron Sommer, has long wanted to get a foothold in the United States to help offset rising competition at home. Earlier attempts to woo Global Crossing Ltd. and Qwest Communications International Inc. failed.
Major shareholders of Powertel and VoiceStream that together own more than 50 percent of the outstanding shares of each company have agreed to vote in favor of the transactions.
Shares of Finland's Sonera Group Oyj, which owns stakes in both, rose as much as 4.9 percent.
"This is a very straightforward deal," said Alan Harris, a fund manager at Munder Capital Management Inc., which owned 3,500 VoiceStream shares as of June. "It's been rumored for a long time. It's something that many of us have just been waiting for."
VoiceStream's purchase of Powertel is expected to close immediately after Deutsche Telekom's acquisition of VoiceStream, about the first quarter of 2001.
If Deutsche Telekom-VoiceStream is terminated, VoiceStream will offer 0.65 to 0.75 of its shares for each share of Powertel, valuing the transaction at $85 a share. It would also assume the $1.25 billion debt of Powertel, which is based in West Point, Ga.
Last month, VoiceStream said it expected to have 4 million customers by 2001. Still, the companies are smaller than Verizon Wireless; the planned venture of SBC Communications Inc. and BellSouth Corp.; AT&T Wireless Group; Sprint Corp.'s Sprint PCS unit; Alltel Corp.; and Nextel Communications Inc.