There is no consensus on who is better off as a result of RWE AG transferring from the Viag AG-British Telecommunications Plc camp to the Veba AG-Cable & Wireless Plc team – but the latter is certainly very pleased to welcome RWE with its telecommunications infrastructure in northern Germany. RWE and Veba will merge their entire communications networks into a new company and create a separate company to provide services. The agreement sees Vebacom, the joint venture between Veba and Cable & Wireless, taking 51% of the new Servco service company, and 49% of the Netco network company. A holding company called RWEcom will be created in which RWE will hold 75% and Vebacom 25%t. RWEcom in turn will hold 51% of Netco and 49% of Servco. Unraveling the complexity, it translates to a 40% stake for Veba in the new alliance, with 37.5% for RWE and 22.5% for Cable & Wireless. Vebacom and RWE will control the two companies through a joint management company, which will be located in Dsseldorf. Vebacom will put its 37.5% stake in the E-Plus cellular phone group and its cable television activities in Servco. This transaction underscores the value of our investment in Germany, materially reduces our exposure to start-up losses and will favorably impact our earnings, cash and balance sheet, Cable & Wireless commented on the deal. Veba holds a 10.5% stake in the UK company. Meantime, Viag AG chairman Georg Obermeier said that Viag and British Telecommunications Plc do not plan any cross-shareholdings when they merge their German telecommunications activities. Obermeier added that the companies would now quickly move to form a new joint company, but would give no details about the equity division, the name of the company, or its capital. They plan to invest $4bn in telecommunications over the next 10 years, of which $2.8bn will be invested in cellular activities.Viag will take a majority stake in the cellular alliance with British Telecom, and 10% of the venture will be left available for a new partner. The two are bidding for the fourth cellular franchise, to be let early next year, but if they do not win it, they will presumably resell others’ air-time.
