Deutsche Telekom still wants out of U.S. market

Deutsche Telekom still wants out of U.S. market
Deutsche Telekom wants out of the U.S. market. A report released on Tuesday says that the German telecommunications firm sees T-Mobile's profits limited by its fourth place ranking in the U.S. market. With 67% of T-Mobile's stock, whatever Deutsche Telekom does with the block will determine what happens to T-Mobile in the states. And while T-Mobile has been the most innovative carrier in the U.S over the last year, adding over 2 million new postpaid subscribers in the last half of 2013, Deutsche Telekom would rather use the proceeds from a sale to improve its German pipeline, and expand in East Europe.

Tim Hoettges, Deutsche Telekom's CEO, is concerned that T-Mobile could be embarking on the same trip it went on in 2011, when AT&T offered $39 billion to buy the carrier. But the Justice Department's refusal to let the deal slide through led AT&T to withdraw its bid, forcing it to pay T-Mobile $3 billion and turn over some strategic spectrum to the mobile operator.

This time, to make sure that there are no surprises, Sprint Chairman Masayoshi Son, and CEO Dan Hesse, paid an advance visit to the FCC and the Justice Department, and both regulators were wary about the combination of the nation's third and fourth largest carriers. Son and Hesse have retreated and will decide soon on whether to forge ahead with the deal, or give up. Son has said that Sprint cannot afford to include a huge break-up fee in the deal. Deutsche Telekom's Hoettges says that the risk of regulators putting the kibosh on the deal is high enough to warrant a huge break-up fee to compensate Deutsche Telekom for the time it will be spending on the transaction. Son doesn't want a break-up fee to be any higher than $3 billion.

Should Deutsche Telekom be in a rush to get rid of T-Mobile, considering that the carrier has been the driving force for change in an industry that desperately needs it? As one telecom banker puts it, "The U.S. is not a logical place to be for them and they will need more capex (capital expenditures) to be relevant there." On the other hand, T-Mobile is currently growing faster than Deutsche Telekom's European businesses.

It should be interesting to see what SoftBank and Sprint decide to do, and whether or not another player, like Dish Network, makes a play for T-Mobile.

source: Reuters



1. hurrycanger

Posts: 1773; Member since: Dec 01, 2013

Well, I'll just enjoy my existing cheapo family plan with T-mo while it lasts...

2. Killertech2099

Posts: 148; Member since: Sep 28, 2013

What the heck are you serious as innovative as T mobile is you want out, your pipeline is the US why would you want to break away from that? I hope this isn't really what their doing, that's not a good move at all. I'm starting to doubt sprint will even buy them now. Not only that they don't have enough for a break up fee.

3. Augustine

Posts: 1043; Member since: Sep 28, 2013

I don't understand why European carriers get a bad taste in their mouths after dipping their toes across the pond: Vodafone is being bought out by Verizon, Virgin timidly got in and got out quickly. Now, why would DT, in spite of the success as of late, want to dump about 25% of its subscribers worldwide?

15. ardent1

Posts: 2000; Member since: Apr 16, 2011

Virgin Mobile USA started out as a MVNO using Sprint's network until Sprint bought the unit. It never had any independent network of its own.

17. Augustine

Posts: 1043; Member since: Sep 28, 2013

Yes, that's what I meant by "Virgin TIMIDLY got in".

4. SprintGuy26

Posts: 229; Member since: Mar 21, 2011

"T-Mobile is currently growing faster than Deutsche Telekom's European businesses." but yet they still want out of USA...i wonder why they want out so bad they didnt say why they wanted out.... t-mobile is killing the others and adding tons and tons of new customers!..ive seen alot of people i know that switch over to t-mobile all within 2-3 months.. really wondering whats going happen with the network?

5. _Bone_

Posts: 2155; Member since: Oct 29, 2012

Cause despite it's growth, DTK is actually losing money on TMo US cause of the incredibly costly LTE expansion and the very aggressive Uncarrier pricing. Consider this: if 50 million Americans decided to take on TMo's deal (that if you switch, they'll pay your termination fee), DTK would go BANKRUPT! So even though TMo US is improving, the return rate is extremely slow and risky, and DTK wants to focus it's resources on it's home market where it already has 50 million customers.

9. downphoenix

Posts: 3165; Member since: Jun 19, 2010

Im sure they would be able to get tons of financing and investments if that was the case, they wouldnt just go bankrupt.

10. Augustine

Posts: 1043; Member since: Sep 28, 2013

DT has about as many mobile customers in Germany (25%) as in the US (25%) and about the equivalent of both combined in the rest of Europe (50%), according to DT got rid of its UK operations much like it wants to do with its US operations and is doing the opposite in Central and Eastern Europe, having just acquired all of its operations in the Czech Republic. Expanding Eastward will definitely be costly too, since those countries have precarious infrastructure. Additionally, their populations are in demographic shambles with very few young people, heavy users of cell phones, with forecasted decelerating demand in a decade. Were it expanding to countries with bustling youth, like Latin America and parts of Asia, it would be a better deal. Maybe I should call in the next conference call for DT investors and challenge their plans: pretty please stay stateside!

14. _Bone_

Posts: 2155; Member since: Oct 29, 2012

Even if DTK leaves TMoUS should still be around, just under a different owner. There's always a corporation looking to enter the carrier market, Amazon wouldn't surprise me, and they could push prices even lower.

6. snowgator

Posts: 3621; Member since: Jan 19, 2011

Hey, Comcast... Are you listening? You missed out on a few other chances for a mobile company. Wait for Softbank to pull out, and you might get T-Mobile for a nice cut-rate price. This will end up bad. At some point, someone a lot less likely to do good things with it will end up with T-Mobile. Maybe regulators need to realize that. T-Mo can't go it alone, and there are worse things then #3 and #4 combining. Like, another party grabbing it, not knowing what it is doing, and running #4 into the dirt.

16. wiiandds

Posts: 64; Member since: Mar 15, 2013

i think the reason sprint and softbank want to buy t-mobile now is becuase they know t-mobile is done. they have no more mojo left. inmy area, i can only get 2G, while all of the other carries have 4G LTE. Sprint should be aloud to buy t-mobile so they can be a better competitor to both verizon and at&t on both network structures.

7. lsutigers

Posts: 832; Member since: Mar 08, 2009

Damn so Sprint is willing to pay up to 3 billion for a breakup fee? I thought when they said Softbank wasn't willing to pay a high break up fee they were talking in the millions... These companies throw around billions like it's 20 bucks.

11. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

If you want the other side to play with you and sign a term sheet, sometimes you have to agree to their terms. Sprint was wanting to buy T-Mo; DT didn't approach Sprint/SoftBank about purchasing T-Mo. Therefore, DT gets to ask for a break-up fee. Just like they did with AT&T. SoftBank (Son) is stupid (full of himself) to think he can do the deal in the face of resistance from FCC and US DoJ. I hope T-Mo is able to extract a $3 B break-up fee from SoftBank. $3 B will buy a lot of network hardware for T-Mo.

13. Blazers

Posts: 764; Member since: Dec 05, 2011

They should borrow some money from all those Russian billionaires. They made out great with the Olympics.

8. thetuba

Posts: 20; Member since: Jun 17, 2013

If Sprint isn't allowed to buy T-Mobile then my money is on Dish Network. They have a ton of spectrum that they either need to sell or use pretty soon

12. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

What makes you think that Dish would be successful in acquiring T-Mo? They weren't going to put any $ into Sprint. Do you think they will put any $ into T-Mo? If DT were to float an offering for its shares of T-Mo where part of the sell price involved putting $ into T-Mo for new network hardware, that might be a better outcome for everyone - DT + T-Mo + T-Mo shareholders + T-Mo customers. Everyone EXCEPT Dish, that is.

18. thetuba

Posts: 20; Member since: Jun 17, 2013

Well I am sure they could get the financing and the FCC/DOJ would be okay with it because there would still be a 4th carrier. I don't see them putting much cash towards T-Mobile's network buildout but their spectrum hoard will definitely help T-Mo gain more coverage which means help them better compete with the bigger 3 companies.

19. JDogg5281

Posts: 74; Member since: Aug 09, 2012

I have a feeling that AT&T will be another person to step in and say how they oppose this merger...after how hard Sprint spoke out against the T-Mobile- AT&T merger I predict AT&T will do the same

20. ddmacpp

Posts: 1; Member since: Mar 05, 2014

With Softbanks hopes down because of regulatory concerns this is the perfect moment for DISH to step in and merge with T-Mobile. T-Mobile is in a much stronger position now and will easily pay off for DISH. DISH needs this to move into the industry.

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