Bloomberg News

Deutsche Telekom Weighs Replacing Gowex as Wi-Fi Partner

July 08, 2014

Gowex Wi-Fi

People walk past a kiosk with an advertisement for Wi-Fi provider Let's Gowex SA in Madrid. Photographer: Gerard Julien/AFP/Getty Images

Deutsche Telekom AG (DTE), Europe’s largest phone carrier, is considering whether it needs a new Wi-Fi partner to replace Let’s Gowex SA (GOW) and ensure clients have connections in cities served by the Spanish company that said it had falsified financial accounts for the past four years.

While Deutsche Telekom will evaluate its relationship with Gowex and identify any potential claims, it “won’t make any immediate changes,” Anne Geelen, a spokeswoman for the Bonn-based carrier, said by phone. “We can still see if we can work with a different provider.”

Deutsche Telekom and Gowex signed a deal last year that lets each company’s customers use the wireless hotspots of the other. Gowex customers can use thousands of Deutsche Telekom hotspots in Europe, the U.S. and on planes, and Deutsche Telekom’s clients can use Gowex’s signals in cities such as Madrid, Paris, Dubai and Buenos Aires. AT&T Inc. (T:US) also worked with Gowex, according to the Gowex website. Spokesmen for AT&T Inc. declined to comment.

Offering customers connections in cities around the world is becoming more important as international travel increases and operators vie to sell expensive data contracts. Gowex, which had been seen as a rare success story of Spanish entrepreneurship, said yesterday it will file for insolvency, and Chief Executive Officer Jenaro Garcia Martin resigned after admitting he presented fictitious financial accounts for at least the past four years.

German Hotspots

Deutsche Telekom currently has 40,000 hotspots in Germany at sites such as airports, hotels and McDonald’s Corp. restaurants, plus more abroad. It pushed further into Wi-Fi through a partnership last year with Fon Wireless Ltd., which has operations in Spain and lets people share their home networks with passersby. Fon offers access to almost 13 million hotspots, according to its website.

Deutsche Telekom probably doesn’t have any major claims from its relationship with Gowex, Geelen said. “Our colleagues are looking at legal steps to make sure the business relationship is sorted out and that claims are made good if there are any,” she said.

Shares of Deutsche Telekom fell 0.2 percent to 12.32 euros at 9:02 a.m. in Frankfurt.

A July 1 report by short-seller Gotham City Research LLC raised suspicion over whether companies Gowex named as its clients really were clients. In the report, Gotham also said Gowex was worthless and that it forged its accounts.

Gotham said Gowex’s “actual” wireless revenue is at most 10 percent of what the company reported, and about 90 percent of its telecommunications revenue “originated from undisclosed related parties.”

Cisco Systems

Gowex told investors that Colt Group SA (COLT) and Telefonica SA (TEF) were among its clients, according to the Gotham report. A representative for Telefonica declined to comment. Paula Muezerie, a spokeswoman for Colt, declined to comment, citing the company’s policy against speaking about suppliers.

Gowex announced on June 18 that it would become a global strategic partner for Cisco Systems Inc. (CSCO:US) John Earnhardt, a spokesman for Cisco, declined to comment.

Gowex says on its website that it provides free Wi-Fi connections as well as support to telecommunications operators for roaming and data-transmission services. Wi-Fi networks can help carriers offload traffic from mobile networks onto higher-capacity cables.

To contact the reporters on this story: Cornelius Rahn in Berlin at crahn2@bloomberg.net; Rodrigo Orihuela in Madrid at rorihuela@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Robert Valpuesta


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