Filed by Voicestream Wireless Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed to be filed pursuant to Rule 14a-12 of
the Securities Exchange Act of 1934
Subject Company: Powertel, Inc.
Exchange Act File Number 000-231022
TESTIMONY OF JOHN W. STANTON BEFORE THE HOUSE COMMERCE COMMITTEE,
SEPTEMBER 7, 2000
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PREPARED TESTIMONY OF JOHN W. STANTON
CHAIRMAN, DIRECTOR, AND CEO, VOICESTREAM
ON
"FOREIGN GOVERNMENT OWNERSHIP OF AMERICAN
TELECOMMUNICATIONS COMPANIES"
TELECOMMUNICATIONS, TRADE AND CONSUMER PROTECTION SUBCOMMITTEE
OF THE HOUSE COMMERCE COMMITTEE
SEPTEMBER 7, 2000
I appreciate this opportunity to testify about VoiceStream's experience with
foreign investment in U.S. telecommunications companies. In our view, current
U.S. policies on foreign investment in telecommunications companies like
VoiceStream--including investment by companies with government ownership--are
sound. American consumers, American companies, and American jobs would suffer if
Congress were to categorically shut off investment in American companies by
companies with more than 25% foreign government ownership.
Our current system for regulating foreign and foreign government investment
strikes the right balance for American consumers and American workers and gives
the United States government full authority to protect our country's legitimate
interests in national security, trade, and fair competition. By contrast,
pending legislation that would change the current system, including Senator
Hollings' amendment to the Senate Commerce-State-Justice appropriations bill and
the freestanding bills (S. 2793 and H.R. 4960), strikes the wrong balance. This
legislation would unnecessarily and harmfully prohibit investment in U.S.
companies that boosts competition, job growth, and consumer welfare.
There are five points that I want to emphasize in my testimony today.
First, VoiceStream is a foreign investment success story. We demonstrate the
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tremendous benefits that foreign investment can bring to American consumers and
workers. VoiceStream is the fastest growing wireless company in the country, and
it is the newest nationwide wireless company. But VoiceStream would not be a
nationwide wireless carrier today and an aggressive new market entrant if we had
been barred from raising significant investment capital from abroad.
Second, VoiceStream's merger with Deutsche Telekom, which we announced on July
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24, 2000, will permit us to become an even more vigorous U.S. wireless
competitor by accelerating our nationwide buildout, and by allowing us to bring
improved service to consumers. DT will give us the financial backing we need to
become a leader in delivering next-generation, broadband wireless to American
consumers.
Third, the big winners from our merger with Deutsche Telekom will be American
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consumers and American workers. Our customers will benefit directly, but all
consumers
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Testimony of John W. Stanton
September 7, 2000
win when there are numerous strong competitors. As this merger strengthens
VoiceStream, it will force the five larger nationwide wireless carriers to work
harder, too. And unlike many mergers, this merger will create American jobs --
good, high-skill, high-paying jobs.
Fourth, legislation to prohibit companies with more than 25% foreign government
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ownership from indirectly owning a U.S. wireless telecommunications company
simply isn't needed to protect U.S. national security and competition interests.
We know from recent first-hand experience that our existing process is thorough
and complete. The mergers of VoiceStream, Omnipoint, and Aerial were scrutinized
by competition authorities at the Department of Justice and the FCC, and by
national security agencies, because of the significant investment by Hutchison
Whampoa, a Hong Kong company. We know that these agencies' review of our merger
with Deutsche Telekom will be equally rigorous.
Fifth, the proposed legislation's inflexible ban on investment by companies with
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more than 25% foreign government ownership would needlessly jeopardize American
trading and investment interests.
Let us review each of these points in more detail.
First, VoiceStream's story shows how foreign investment benefits American
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consumers and workers. I founded VoiceStream as a subsidiary of Western Wireless
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in 1994. And since that time, we have enjoyed phenomenal success as a result of
our hard work. Western Wireless spun off VoiceStream as an independent company
just last year.
VoiceStream is today the fastest growing, most dynamic nationwide competitor in
the wireless marketplace. As of the end of June, we serve 2.5 million
subscribers and employ over 8,300 people nationwide. Our phenomenal subscriber
growth promises even more job growth in the months ahead as we build out and
expand our service areas. Moreover, VoiceStream recently reached an agreement to
acquire PowerTel, Inc., which operates a wireless network spanning 12 states in
the southeastern U.S., in areas where VoiceStream currently does not market
wireless services. As a result of the PowerTel acquisition, VoiceStream or its
affiliates will hold licenses reaching 90% of the population of the United
States, including 24 of the top 25 U.S. cities.
We have received industry awards and have been recognized for our innovation.
Our e-notes service allows customers to send and receive short e-mails directly
from wireless phones. Our InfoStream product allows subscribers to receive
customized messages, such as sports scores, stock alerts, news headlines, and
weather updates, all through wireless phones. Our customers are able to tailor
the information they receive, based on their own needs and interests.
VoiceStream did not become the country's fastest-growing wireless company
through government largess. Nor did we rely on local telephone, long distance or
cable services
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Testimony of John W. Stanton
September 7, 2000
communications businesses to generate large cash flows that could finance our
growth. In 1994, we convinced private investors to risk their capital by
investing in VoiceStream so that we could acquire licenses in FCC-conducted
auctions. In the last year, we combined with smaller wireless companies
including Omnipoint, Aerial Communications, and now PowerTel. Over the past five
years, we had to raise capital to build out and operate these licenses. We
raised money in the public and private, debt and equity markets in the United
States but we could not meet all of our capital needs in the U.S. We also raised
foreign capital from those willing to invest in our new network and assume these
risks. Sonera, the Finnish telecommunications company that is majority owned by
the Finnish government, invested nearly $1 billion, and Hutchison Whampoa, a
Hong Kong-based telecommunications company, invested $1.2 billion.
Quite simply, without these foreign investments, VoiceStream would not be the
substantial innovative, competitive presence in the U.S. wireless markets that
it is today. VoiceStream's history demonstrates that foreign investment in the
United States creates jobs and benefits American consumers.
Although we are proud of our successes, we never lose sight of the fact that we
are a relative newcomer entering a brutal marketplace. More often than not, we
are the sixth or seventh competitor entering markets to battle established
carriers with significant brand identification and financial backing: Verizon
Wireless, SBC/BellSouth, AT&T, Sprint, and Nextel. We succeed in signing up new
customers every day. To stay competitive, we must constantly innovate, expand
our service areas, and roll out more features at prices consumers demand, which
requires more capital to expand our services areas and service offerings.
As a consequence, we arrive at my second point -- the VoiceStream/DT merger
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makes sense for both VoiceStream and DT. First and foremost, VoiceStream and DT
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have a unique synergy. GSM technology has become the global wireless standard,
but VoiceStream is the only nationwide U.S. carrier to use GSM. The merged
company will be the first to offer state-of-the-art GSM technology in a
seamless, worldwide network. One phone, one number, with worldwide service.
Despite our potential, VoiceStream is today an adolescent among adults -- we
have to raise money to buy more licenses, build more systems, and market our
services. To be competitive, we need to own and operate a national wireless
network. When completed, the PowerTel acquisition will fill one significant hole
in the Southeast after which VoiceStream will be licensed to serve nearly 90% of
the American people. We still need to purchase licenses to serve the remaining
10%, primarily in California and the Carolinas. With DT's backing we can compete
effectively to acquire the licenses that will allow us to achieve nationwide
coverage.
Over the past 5 years we have built nearly 10,000 cell sites and today offer
service in about half of our licensed markets (including PowerTel). We need to
continue to build and finish our build-out. DT's capital will enable us to
complete our national build-out.
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To be competitive, we also must be a major player in the rollout of next
generation, broadband wireless systems. Standing alone, we simply did not have
the financial resources and scale of our competitors--who are this country's
largest providers of local and long distance telephone service and cable
service. Our merger with DT now gives us the resources to compete with these
carriers.
DT's worldwide scale will give us the resources needed to introduce next
generation broadband wireless services and will make us a stronger competitor in
the U.S. We will not be alone in our ability to draw upon the lessons of Europe
-- Verizon undoubtedly will benefit from Vodafone's European experience and the
BellSouth/SBC wireless venture will benefit from their extensive international
investments.
In turn, this transaction allows DT to fill a hole in their worldwide network.
Without us as its partner in the U.S., DT would be at a competitive disadvantage
in Europe, where Mannesmann/Vodafone/AirTouch--which serves the U.S. market
through Verizon Wireless--is one of DT's biggest competitors.
Third, the big winners from the VoiceStream/DT merger will be American consumers
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and American workers. American consumers will enjoy the benefits, as VoiceStream
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becomes a stronger, quicker, more efficient competitor. The merger will speed
our buildout and accelerate the introduction of new mobile data applications,
forcing our competitors to respond with better services of their own. Consumers
will also benefit from global roaming, unified billing, and worldwide customer
service, which we now will be able to offer them. VoiceStream is today the best
value in wireless. The more we expand, the more Americans can benefit from the
lower prices we offer.
Additionally, consumers will benefit from a new source of broadband Internet
access as we introduce next-generation services. Today consumers have only two
choices for broadband Internet access in their homes -- monopoly telephone lines
and cable modem service. Next-generation wireless will be the third high-speed
Internet access alternative, which will expand the choices, and we would expect
lower prices to consumers for high-speed Internet data service. This merger will
accelerate the deployment of the broadband Wireless Internet and give consumers
a true choice among providers of high-speed data.
Our accelerated network buildout and introduction of new services will spur job
growth among American workers. The 8,300 jobs at VoiceStream today (which will
rise to 10,900 after the PowerTel acquisition closes) are jobs that did not
exist before VoiceStream and its predecessor companies built this new wireless
network. We estimate that we will hire 2,000-3,000 more workers to expand our
networks and increase our sales, marketing and customer-service support
facilities to keep pace with this expansion. And these jobs will be in the U.S.
Unlike automobile or textile manufacturing jobs, wireless operations are
inherently local. Leadership, marketing, sales, network operations, and customer
service staff all must be locally knowledgeable and available.
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Testimony of John W. Stanton
September 7, 2000
Fourth, the proposed legislation to change U.S. foreign ownership law is a
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solution in search of a problem. National security and competition are well
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protected under current laws, and there is no need to enact a categorical ban on
investment by companies with foreign government ownership.
I know from personal experience that we have national security safeguards in
place. VoiceStream has been through this process before, and has entered
agreements with various national security agencies to preserve U.S. interests.
The Exon-Florio Amendment to the 1988 Trade Act is the centerpiece of our
current process for protecting our national security in the case of mergers
involving foreign companies, whether or not foreign government ownership is
involved. Under this law, the Committee on Foreign Investment in the U.S.
("CFIUS") reviews foreign mergers, and mergers that raise national security
concerns can be blocked or conditioned. Agencies involved in the CFIUS review
process include the Departments of Commerce, Defense, Justice (including the
FBI), State, Treasury and the National Security Council.
In the past year, VoiceStream negotiated a national-security agreement. That
agreement also was made a condition of our licenses under the FCC's review and
approval process. As a consequence, our failure to abide by those agreements
would subject us to FCC fines or even license revocation. Since we cannot
operate our business without these licenses, we have this additional strong
incentive to comply with our national security commitments.
Other safeguards are in place today to address competition concerns. The Clayton
Act requires the Department of Justice's Antitrust Division to review a merger
such as VoiceStream/DT, to negotiate consent decrees to resolve anti-competitive
problems, and to block the merger if any problems with the transaction cannot be
remedied. The FCC must also approve the transfer of control of VoiceStream's
wireless licenses, and reject it if it finds that the merger is not in the
public interest.
Our previous mergers were thoroughly reviewed by both agencies, and VoiceStream
will soon file for FCC approval of the PowerTel acquisition and the DT merger.
As was the case with our previous mergers, the FCC will provide interested
members of the public with the opportunity to express their views. The FCC will
examine these comments, and will review our proposal for its effects on consumer
welfare, national security, law enforcement, foreign policy, and trade. The FCC
can deny or condition mergers that do not meet its public interest test.
Based on past experience, the government's review of the VoiceStream-DT merger
will be detailed and rigorous, and will focus on the facts of this case. I am
confident that these agencies will uncover no substantial issues of national
security that have not already been substantially addressed by our existing
agreements, and that they will conclude that this merger is overwhelmingly
pro-competitive. In my opinion, a case-by-case review is the appropriate
approach. The proposed legislation, on the other hand, would create a rigid,
categorical percentage threshold that would tie the hands of U.S.
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Testimony of John W. Stanton
September 7, 2000
governmental officials. They would be left with no discretion to approve a
specific transaction even if the facts showed it to be a good deal for the
American people.
With that background, I will address some of the facts concerning the
VoiceStream/DT merger. The VoiceStream/DT merger is pro-competitive. It will
strengthen the smallest nationwide wireless carrier and allow VoiceStream to
enter new markets and provide new services. The merger will not concentrate
market share among existing operators in the same local markets, as DT and
VoiceStream have no overlapping service areas. It will not reduce service
offerings in the U.S., in Europe, or anywhere else--in fact, it will increase
them. The VoiceStream/DT merger simply makes VoiceStream a stronger competitor
in the U.S. wireless marketplace.
Even though the German government will have a significant ownership stake in the
combined company, it will not exercise DE JURE or DE FACTO control over
VoiceStream. DT is a private corporation organized under German law, not an
agency of the German government. The German government does not manage DT, and,
in fact, holds only one of twenty seats on DT's board of directors.1 The German
government has consistently voted with DT's management and other board members,
and holds no special right to veto corporate decisions. The German government's
directly-held share of DT has fallen from 100% in 1995, to 75% in 1996, to 43.2%
today (with another 15% held in trust by a German public bank for sale as market
conditions permit). If this merger closes, the German government will directly
hold only 32.7% of the new company, with another 11.3% indirectly held by the
bank. In fact, this type of merger is the quickest way for the government to
reduce its ownership share of DT. To reduce the German government's stake to 25%
via stock sales would require an IPO FOUR TIMES LARGER than AT&T's
record-setting wireless IPO last spring.
DT is not backed by government credit, government subsidies, government
guarantees, or government tax preferences. There is also no objective
marketplace evidence of any implicit credit guarantee. According to Standard &
Poor's, DT's credit rating is identical to BellSouth's, SBC's and AT&T's, and
lower than British Telecom's. Based on work undertaken for VoiceStream by
Goldman Sachs, DT's cost of borrowing is greater than that of AT&T, Worldcom and
BellSouth -- all of which are smaller than DT. As a publicly traded corporation,
DT is audited regularly and subject to all EU and German corporate laws. Indeed,
the receipt of favorable government treatment would violate DT's corporate
charter, as well as EU and German laws.
Even if DT were somehow aided by the German government--which it is not--it
would be impossible for DT to harm competition in the U.S. by cross-subsidizing
VoiceStream. The U.S. wireless market is highly competitive and VoiceStream is
tiny when compared with the other nationwide wireless networks - all of which
have very significant financial backing and resources. Even if it were somehow
possible to engage in cross-
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1 Kreditanstalt fur Wiederaufbau ("KfW"), a public bank that is a private
corporation under German law, also has a single seat on the board.
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Testimony of John W. Stanton
September 7, 2000
subsidization in the U.S. (which it is not), German market conditions and
German regulations preclude DT from charging monopoly prices to generate money
for such efforts.
DT faces substantial competition in German wireless markets, where DT is not
even the largest wireless provider (Mannesmann/Vodafone is larger). BellSouth is
another major wireless competitor in Germany through its investment in E-Plus.
In the long distance market, in which many U.S. companies actively compete
today, DT has lost 40% of its market share. In local telephone services, DT is
subject to stringent regulation, both by the German government and by the
European Union. T-Mobile International ("TMO"), the DT subsidiary that
VoiceStream would join after the merger, is a structurally separate entity from
DT's wireline local telephone operation. Under German law, TMO must maintain a
separate set of accounts from the wireline operations. Moreover, TMO is subject
to rules that require arm's length transactions and structural separation which
creates transparency of financial relations and enables German and European
Union regulators to detect cross-subsidies easily.
In sum, there are simply no unfair competitive advantages created by the
DT/VoiceStream merger. This merger is overwhelmingly pro-competitive and
pro-consumer.
Fifth, the Hollings Amendment would needlessly jeopardize American interests
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abroad. Under the WTO Basic Telecom Agreement, the U.S. made a commitment to
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open international investment and competition. VoiceStream has relied on those
commitments as it has sought to raise the financing necessary to fill in gaps in
its national service areas, to complete its U.S. build-out, and to make the
investments necessary to bring next-generation broadband wireless services to
market. Changing the rules of the road after the race has started is simply
unfair.
More broadly, this legislation endangers all U.S. companies' foreign investment
opportunities, because we believe that the proposed law would violate U.S. WTO
commitments. The U.S.' WTO commitment was explicit and unequivocal: when
addressing whether there would be limitations on indirect foreign ownership of
common carrier wireless licenses, the U.S. stated simply "None." The
Congressional Research Service has concluded that the proposed legislation is
likely to violate U.S. market-opening commitments under the WTO and will subject
us to a challenge under WTO rules. This legislation would undoubtedly undercut
efforts by U.S. trade negotiators to encourage other countries to liberalize
their foreign investment and trade laws.
VoiceStream is not alone among American interests in opposing this unnecessary
and unwise legislation. Other opponents include groups as disparate as the U.S.
Chamber of Commerce and the Communications Workers of America. Harris Miller,
President of the Information Technology Association of America put it
succinctly: "[The legislation] is a protectionist measure, which could hamstring
the robustness of our digital economy. The idea just doesn't connect with the
reality of the global marketplace ...."
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Testimony of John W. Stanton
September 7, 2000
Conclusion. The VoiceStream/DT transaction will benefit American consumers by
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offering them lower prices and better services, and will create new American
jobs. Categorically banning investment in the U.S. telecommunications sector by
companies with more than 25% foreign government ownership will hurt American
consumers, American workers, and American companies at home and abroad. The
current process by which mergers of this type are reviewed by CFIUS, DOJ, and
the FCC provides ample means to protect fundamental U.S. interests in national
security and fair competition. We look forward to working closely with these
agencies during this review process, and we look forward to fulfilling our
potential as a strong new competitor in the marketplace.
Thank you for this opportunity to testify on such an important public policy
issue.
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THE FOREGOING CONTAINS CERTAIN STATEMENTS THAT ARE NEITHER REPORTED FINANCIAL
RESULTS NOR OTHER HISTORICAL INFORMATION. THESE STATEMENTS ARE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE SAFE-HARBOR PROVISIONS OF THE U.S. FEDERAL
SECURITIES LAWS. BECAUSE THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS
AND UNCERTAINTIES, ACTUAL FUTURE RESULTS MAY DIFFER MATERIALLY FROM THOSE
EXPRESSED IN OR IMPLIED BY THE STATEMENTS. MANY OF THESE RISKS AND UNCERTAINTIES
RELATE TO FACTORS THAT ARE BEYOND VOICESTREAM'S ABILITY TO CONTROL OR ESTIMATE
PRECISELY, SUCH AS FUTURE MARKET CONDITIONS, CURRENCY FLUCTUATIONS, THE BEHAVIOR
OF OTHER MARKET PARTICIPANTS, THE ACTIONS OF GOVERNMENTAL REGULATORS AND OTHER
RISK FACTORS DETAILED IN VOICESTREAM'S REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THIS DOCUMENT.
VOICESTREAM DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY RELEASE ANY REVISIONS
TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE
DATE OF THIS DOCUMENT.
VOICESTREAM, DT AND POWERTEL WILL BE FILING A JOINT PROXY STATEMENT/PROSPECTUS
AND OTHER DOCUMENTS RELEVANT TO THE PROPOSED MERGER TRANSACTIONS INVOLVING DT,
VOICESTREAM AND POWERTEL WITH THE U.S. SEC. INVESTORS ARE URGED TO READ THE
PROXY STATEMENT/PROSPECTUS (WHEN IT BECOMES AVAILABLE) AND ANY OTHER RELEVANT
DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
SECURITY HOLDERS MAY OBTAIN A FREE COPY OF THE PROXY STATEMENT/PROSPECTUS (WHEN
AVAILABLE) AND OTHER RELATED DOCUMENTS FILED BY DEUTSCHE TELEKOM, VOICESTREAM,
AND POWERTEL AT THE COMMISSION'S WEBSITE AT WWW.SEC.GOV OR AT THE COMMISSION'S
PUBLIC REFERENCE ROOM LOCATED AT 450 FIFTH STREET, NW, WASHINGTON D.C 20549 OR
AT ONE OF THE COMMISSION'S OTHER PUBLIC REFERENCE ROOMS IN NEW YORK, NEW YORK
AND CHICAGO, ILLINOIS. PLEASE CALL THE COMMISSION AT 1-800-SEC-0330 FOR FURTHER
INFORMATION OF THE PUBLIC REFERENCE ROOMS. WHEN AVAILABLE, THE PROXY
STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS FILED BY VOICESTREAM MAY ALSO BE
OBTAINED BY CONTACTING VOICESTREAM WIRELESS CORPORATION, ATTENTION: KEN
PRUSSING, EXECUTIVE DIRECTOR, INVESTOR RELATIONS, 3650 131ST AVENUE SE,
BELLEVUE, WA 98006.
INFORMATION REGARDING THE IDENTITY OF THE PERSONS WHO MAY, UNDER SEC RULES, BE
DEEMED TO BE PARTICIPANTS IN THE SOLICITATION OF STOCKHOLDERS OF VOICESTREAM IN
CONNECTION WITH THE DT AND/OR POWERTEL MERGERS, AND THEIR INTERESTS IN THE
SOLICITATIONS, ARE SET FORTH IN A SCHEDULE 14A FILED ON JULY 25, 2000, AND
ADDITIONAL INFORMATION WILL BE CONTAINED IN THE PROXY STATEMENT/PROSPECTUS.
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