The T-Mobile and Deutsche Telekom merger might not happen because of… Huawei

One of the biggest transcontinental mergers – the T-Mobile + Deutsche Telekom concept – might not go through at all.

Huawei could be the apple of discord and, ultimately, Deutsche Telekom itself might be to blame. The German giant has a great appetite for anything Huawei and doesn't plan to stop buying its products.

And, as anyone over the age of seven knows, Huawei is "bad" and it's banned in the US for national security reasons. People under the age of seven know the same, but regarding TikTok.

What the boss says

A detailed report from Light Reading highlights how Timotheus Höttges (CEO of Deutsche Telekom) has often been vocal about Europe's overregulated landscape. Höttges correctly points out that the EU is lagging behind in terms of cloud technology and AI, compared to the US and Asia.

He even said he'd not start a company in Europe today because of bureaucratic hiccups like GDPR, the Digital Markets Act and harsh AI laws.

Höttges is doing well in the US and T-Mobile became the main reason for Deutsche Telekom's success over the last decade. In 2013, the US business made up a much smaller share of group sales and earnings, but by last year it was generating nearly two thirds of revenue and about 67% of group basic earnings.

Deutsche Telekom's overall revenues and profits rose sharply during that period, largely because of T-Mobile's growth.

So why merge if you detest the EU's business landscape?

According to Höttges, the merger might create a behemoth business worth $260 billion.

This move is less about believing in Europe and more about control, size and financial strategy. Höttges may want more direct access to T-Mobile's strong growth while using a combined company to increase Deutsche Telekom's total value and global reach.

Even if Europe is seen as slower and heavily regulated, merging the businesses could give Deutsche Telekom a bigger structure and more options for future deals

Others say that this bombastic plan was a way for the CEO to try and distract attention from a local journalistic report about an alleged case of bribery involving Deutsche Telekom.

The problems are not imaginary

But Deutsche Telekom loves Huawei. The US administration does not.

See, US investors would be concerned because Deutsche Telekom still relies heavily on Huawei, a Chinese company seen by US authorities as a security risk.

Even though Höttges supports closer ties with the US, Huawei remains the main supplier for the company's mobile network in Germany, with European alternatives like Ericsson and Nokia making up less than 40% of its 5G setup.

The potential merger will surely trigger national security worries during the review of the deal in the US. On top, Deutsche Telekom is still investing billions of euros in upgrading Huawei equipment through its network modernization program for the next two years.

Doubling down

It's funny how Höttges has continued to support using Huawei equipment and has spoken against banning it.

He says that industries are interconnected and that banning companies like Huawei could harm other businesses that also depend on trade with China.

That's great, but he'll need all the luck in the world trying to convince the US administration – Republican or Democrat, doesn't matter – that Huawei is "good" again.

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