Deutsche Telekom is linking with France's Lagardère group in an attempt to expand its online reach into non-German speaking countries.
Its T-Online subsidiary is acquiring 99.9% of Lagardère's internet service provider, Club Internet, in exchange for the French group receiving a 6.5% stake in the merged online business which will have 4.2m users. That compares with AOL Europe, which has some 3.8m customers.
Although the exact value of the deal will not be known un til T-Online is floated in the spring, initial estimates put a price tag of about euro1bn (£610m) on Club Internet. That would value each Club Internet subscriber at just over £2,000 - less than half the value of Freeserve subscribers.
However, the deal could help T-Online command a higher value because it extends its operations outside its current confines of Germany and Austria but analysts are expecting further online deals from the German company.
"This is good news for the flotation of T-Online which we expect in April. It's really an internationalisation story - Germany, Austria and now France," according to Holger Grawe, telecoms analyst at WestLB.
Deutsche Telekom shares have soared in recent months but the group remains under pressure to put together an international expansion strategy in the face of the consolidation of the telecoms industry, exemplified by Vodafone acquisition of Mannesmann.
It is protected from potential predators by its size - it has a market capitalisation in excess of £160bn - and by the fact that the German state still owns about two thirds of the shares. The state holding has proved a handicap in the past - notably when Deutsche Telekom sought to pre-empt Olivetti's bid for Telecom Italia only to be thwarted by the Italian government's concerns about state ownership.
However, the level of the German government's control of Deutsche Telekom is likely to be reduced via the sale of further shares. The deal with Lagardère underline's Deutsche telekom's strategy in floating the T-Online operation.
News of yesterday's deal lifted Deutsche Telekom shares by 1.2% while Lagardère shares ended a volatile day's trading up 2.9%.
