After trying to sell its stake in T-Mobile US Inc (TMUS) several times, Deutsche Telekom AG (ADR) (DTEGY) will now allow the US carrier to continue operations as an individual entity.
Deutsche CEO Timotheus Hottges made the announcement in an interview with Bloomberg. He said: “We are looking into the options, but nevertheless we have an independent, self-funding future for our activities in the US,” and, “It is a great business, it is a great perspective, we could have a lot of potential to realize in the future.”
The news will likely end the uncertainty that has surrounded T-Mobile regarding its future, with CEO John Legere remarking that he was “sick and tired” of all the merger talks. The company’s stock has traded down 17.22% year-to-date (YTD) following the failed merger attempts.
Fearing the large scale of AT&T Inc. (T) and Verizon Communications Inc. (VZ), Deutsche had been trying to exit the US market for quite some time. Mr. Hottges still believes that a combination of smaller players will be more effective than competing alone. He said: “These two companies are generating more than 100 percent of the total cash flow of the industry,” and, “It is much better if there would be a combination or consolidation of smaller players to even attack the bigger players in a more efficient way.”
Previous Attempts
The company tried to sell its stake in T-Mobile to AT&T back in 2011, but could not strike a deal due to regulatory opposition. Sprint Corporation’s (S) parent company, Softbank Corp (USA) (SFTBF) later made a bid for the carrier, hoping that the acquisition would allow Sprint to effectively compete in the market. However, SoftBank also gave up due to regulatory pressures in August.
Iliad AKT’s (ILIAF) $15 million bid for T-Mobile was rejected. The improved bid of $18 million was also rejected after Deutsche Telekom deemed it insufficient.
Deutsche has reconsidered selling its US stake due to a saturating postpaid market and shrinking revenue growth in Europe. T-Mobile is the German company’s only growing asset, accounting for a third of its revenues, and almost a quarter of its consolidated adjusted EBITDA. The US carrier also continues to see remarkable growth in subscriber acquisition, adding more than a million users in the previous quarter.
Source: http://www.bidnessetc.com/27736-deutsche-telekom-allows-tmobile-to-stay-independent/
