BUSINESS

Kmart: What rate version?

Kmart will fail if it tries to be a "second- or third-rate version" of Wal-Mart and must stake out a different niche, the discount retailer's chairman told shareholders Tuesday. Edward Lampert, Kmart Holding Co.'s chairman and majority shareholder, said the company should focus on giving customers specific reasons to shop at Kmart, such as its revamped exclusive clothing lines that will hit stores this summer. He said when it comes to technology allowing speedy movement of inventory, no retailer could beat Wal-Mart Stores Inc., the world's biggest retailer. "If that's who our competition is going to be, and we're going to be a second- or third-rate version, I don't think we're going to win," Lampert said during Kmart's first shareholder meeting since emerging from bankruptcy protection a year ago. Less than 100 people attended Tuesday's meeting, which lasted an hour, most of which was spent on shareholders' questions for Lampert. The business on the agenda, approving the appointment of an auditor and of an incentive plan, was wrapped up in the first three minutes. Speaking of the company's progress and direction, Lampert focused on the same themes of profitable sales and "back-to-basics" retailing that Kmart executives have talked about over the past year. "We're taking baby steps to find a message that we think will resonate with our present customers, as well as those who may have shopped at Kmart in the past," Lampert said. He pointed to a new advertising campaign that features television spots that match the cover of a particular week's ad circular. That might seem like an obvious tactic, but it's something that had not been done in the past, he said. The company is taking a deliberate approach to change, with "no grand five-year plan," Lampert said. For example, he said Kmart does not intend to completely redesign stores, but instead is making strategic small changes, such as widening aisles. Troy-based Kmart posted a profit in the previous two quarters and has won praise for its financial turnaround. However, sales have continued to drop. The company has amassed $2.2 billion in cash, which Lampert said was more than enough. "You'd like to be able to live through another 9-11, so to speak, but you don't need that much cash to do that," he said. Shares of Kmart finished up 19 cents, or 0.4 per cent, at $51.19 on the Nasdaq Stock Market.-AP.

PetroFalcon

PetroFalcon Corp. said Tuesday it has signed a mandate letter with International Finance Corp., an arm of the World Bank, calling for up to $40 million US in financing to develop gas reserves in the state of Falcon, Venezuela. Gas from the Cumarebo and La Vela fields will be delivered to a gas pipeline being constructed by under construction by Petroleos de Venezuela SA, the stateowned oil company, which will transport the gas to the Paraguana Refining Complex and other industrial customers in western Venezuela. PetroFalcon (TSX:PFC) also announced Tuesday that it has mobilized a workover rig and begun activity at the La Vela field.

Deutche Telekom

BERLIN (AP) - Deutsche Telekom is paying $2.3 billion US to end a joint venture with the U.S. wireless company Cingular Wireless and buy Cingular's mobile phone network in California and Nevada. The agreement announced Tuesday would unwind a joint venture set up in 2001, under which Deutsche Telekom's T-Mobile USA customers phoned over the Cingular network in California and Nevada and Cingular's customers used the T-Mobile USA network in New York. "Deutsche Telekom will further strengthen its presence and growth potential in the United States," the Bonn-based firm, Europe's biggest telecommunications company, said in a statement. Deutsche Telekom bought American company VoiceStream, now renamed T-Mobile USA, during the technology boom a few years ago. T-Mobile USA passed Nextel Communications Inc. to become the fifth-largest U.S. wireless company last year. Tuesday's announced deal will give Deutsche Telekom a growing stake in a rapidly growing market for wireless phones. About 55 per cent of consumers in the United States own cellphones, compared with 80 per cent in Europe, giving the German company a platform for much stronger growth. Deutsche Telekom said the $2.5 billion purchase price of the network in California and Nevada will be offset by a $200 million payment related to the unwinding of the joint venture. T-Mobile will make a cash payment to Cingular of about $2.3 billion. The deal likely will close at the beginning of next year, Deutsche Telekom said. It is subject to U.S. antitrust authorities' approval of Atlanta-based Cingular's pending $41 billion acquisition of AT&T Wireless Services Inc. That deal would make Cingular the largest U.S. cellphone provider with 46 million customers. Cingular is a joint venture of Atlanta-based BellSouth Corp. and San Antonio-based SBC Communications Inc. In addition to the network sale, Cingular will buy from T-Mobile network capacity worth at least $1.2 billion over a maximum four years "to ensure the orderly migration of Cingular's customers in California, Nevada and New York over time to the network they will acquire from AT&T Wireless," Deutsche Telekom said.

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