VoiceStream to acquire Powertel

Even as VoiceStream Wireless Corp. (Bellevue, WA) has an acquisition offer from Deutsche Telekom, the carrier has entered into an agreement to acquire Powertel Inc. (West Point, GA) to expand its coverage in the Southeastern United States. Holders of Powertel common and preferred stock will receive VoiceStream common shares at a conversion ratio ranging from .65 if the average closing price of VoiceStream common stock is $130.77 or above and .75 if the average closing price is $113.33 or below. Between these two points, the ratio adjusts to yield $85 in VoiceStream common stock for each share of Powertel common stock equivalent.

Because Deutsche Telekom has already agreed to acquire VoiceStream, it has formed a separate agreement to acquire Powertel, whose shareholders will receive 2.6353 Deutsche Telekom shares for each share of Powertel common stock. Based on the closing price of the Deutsche Telekom ordinary shares on the Frankfurt Stock Exchange on August 25, 2000 of Euro 44.30 (the equivalent of approximately U.S. $39.98), each share of Powertel common stock would have a potential value of US $105.36.

The Deutsche Telekom/Powertel acquisition is expected to close immediately after the Deutsche Telekom/VoiceStream acquisition closes, and the VoiceStream/Powertel merger will not close if the Deutsche Telekom/VoiceStream merger is consummated. Thus, Powertel shareholders will receive Deutsche Telekom shares unless the merger between VoiceStream and Deutsche Telekom is terminated. The transaction structure was designed to provide U.S. tax deferred treatment to Powertel shareholders.

There are approximately 55.9 million outstanding Powertel shares on a fully diluted basis, including shares underlying outstanding options, warrants and convertible preferred shares and shares potentially issuable in connection with the pending Powertel – DiGiPH transaction. Based on this number of outstanding Powertel shares, Deutsche Telekom would issue up to approximately 147.3 million new shares. Holders of Powertel preferred shares will exchange their shares on the basis of the number of underlying Powertel common shares.

For the six months ending June 30, 2000, VoiceStream and Powertel reported combined total revenues of approximately $923 million and collectively served approximately 3.3 million digital wireless customers. Powertel achieved positive operating cash flow for the first time in the first quarter of 2000 and again in the second quarter of 2000 and had approximately $280 million in cash and cash equivalents at June 30, 2000.

Powertel owns wireless licenses covering 25 million people (POPs) and operates a GSM network spanning 12 states in the Southeastern United States, in areas where VoiceStream currently does not market its wireless services. As of June 30, 2000, Powertel had approximately 727,000 customers, year-to-date total revenues of $212.3 million and positive operating cash flow for the last two quarters.

Edited by Ellen Jensen
Managing Editor, Wireless Networks Online