Deutsche Telekom CEO Tim Hoettges is eyeing up potential merger partners for T-Mobile US as he prepares for consolidation in the industry following the completion of the country’s spectrum auction, according to Bloomberg.
“It is not only permitted and possible, but now very likely that discussions will get under way concerning various potential strategic combinations of businesses in our industry,“ Hoettges said in prepared remarks to reporters. “That includes our company, T-Mobile US.“
T-Mobile US, owned 65 percent by Deutsche Telekom, has been transformed from a unit Hoettges once aimed to unload to what he calls his “kingmaker asset.“ SoftBank Chairman Masayoshi Son said he wants to restart merger talks between his Sprint and T-Mobile US, sending shares up as investors bet a deal may finally happen under the looser regulatory climate of the Trump administration.
Deutsche Telekom reported that first-quarter adjusted earnings before interest, taxes, depreciation and amortization climbed 7.5 percent to 5.55 billion euros, aided by T-Mobile US, which raised its subscriber forecast for the year in April. While German sales were largely flat, T-Mobile US is increasingly pressuring larger rivals Verizon and AT&T. The company confirmed its full-year forecast and said first-quarter revenue grew 5.8 percent to 18.7 billion euros.
Underscoring the importance of the U.S. business, Deutsche Telekom’s other foreign investments are performing poorly. Deutsche Telekom wrote down the value of its BT stake by another 700 million euros after lowering it by 2.2 billion euros earlier this year due to the continued decline in BT’s shares. That contributed to a drop in first-quarter net income to 747 million euros from 3.13 billion euros a year earlier, when the carrier benefited from the sale of wireless carrier EE to BT.
T-Mobile’s growth trajectory and Deutsche Telekom’s past investments in the carrier set the bar “extremely high for pursuing any strategic alternative to this independent course,“ Hoettges said. Even if T-Mobile would take part in merger talks, it would be “impossible to say“ if such talks succeed, he said.
According to people familiar with the matter, Sprint has started preliminary conversations to merge with T-Mobile. Executives of both SoftBank, Sprint’s largest shareholder, and Sprint itself have had informal contact with Deutsche Telekom about a transaction, said the people.
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