Deutsche Telekom has decided to buy back the remainder of the shares in its Internet subsidiary, T-Online, and reincorporate it to strengthen its voice, data and video services.
It has offered to nearly €3 billion to re-absorb the 26 percent of T-Online International - Europe's largest ISP with more than 13 million customers.
The move reflects a trend in the telco sector to tap the potential of high-speed broadband Internet access and services by integrating them with their core fixed-network operations. Deutsche Telekom follows France Telecom, Europe's second largest carrier, which offered to buy out the minority shareholders in its Wanadoo Internet unit.
The merger is "the right move at the right time", Deutsche Telekom CEO Kai-Uwe Ricke said. The decision was shaped by strong increases in the number of broadband customers and the growing convergence of business models developed by telcos and ISPs, particularly in the area of "triple-play" voice, Internet and TV services over broadband connections.
"This progressive merging also means that from a customer perspective, the Internet is losing its status as a separate, independent business segment," Ricke said.
Under the planned merger, T-Online will remain a separate organisation responsible for developing IP services and applications, while T-Com, the fixed-network unit, will focus on network management, integrated platforms and the development of open standards, in addition to providing circuit-switched telephone service.
Not surprisingly, as broadband convergence begins to spill into wireless communications, Deutsche Telekom has shunned moves to spin off its mobile phone unit, T-Mobile. Earlier this month, Siemens merged its fixed and mobile communication network operations.