Reuters: Deutsche Telekom keen on U.S. exit, but in no longer in a rush to sell

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A fresh report this morning claims that Deutsche Telekom is keen on selling T-Mobile as it seeks to exit the U.S. market place. According to Reuters‘ sources “familiar with the matter“, it sees its 4th position behind the likes of Verizon, AT&T and Sprint as “limiting long-term profitability“.

Although T-Mobile’s position as the #4 is one of the reasons behind wanting to sell, its biggest concern is close to home in Europe. Currently, DT is facing a lot of competition from cable companies and is wanting to expand across Eastern Europe. Part of that movement was buying a small Czech subsidiary for $1 billion earlier this week.

As for selling Magenta to Sprint/SoftBank, Deutsche Telekom’s new chief executive, Tim Hoettges, is aware of the potential regulatory stumbling blocks and doesn’t want a repeat of the 2011 attempted buyout by AT&T. As we’ve read a few times recently, both the FCC and DoJ have voiced their concerns over the 3rd and 4th-placed carriers merging in to one and reducing the number of major network operators.

Thankfully for Tmo faithfuls, Hoettges isn’t in a rush to sell the company. And that’s thanks to the success of last year’s Un-carrier movement. It virtually matched Verizon adding subscribers to its ranks every quarter. The final quarter of 2013 was arguably the most impressive after adding over 1.6 million new customers. Reuters’ report states that DT could wait for “a couple of years” now that its US property has turned in to one of its most successful.

Via: Reuters

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  • Edward McCall

    Can’t we go at least a good year without hearing about a buyout or merger rumor.

    • UMA_Fan

      Its probably going to keep happening while there is such a disparity of customers between Tmo/Sprint vs Verizon/ATT

  • sushimane

    That’s good to hear but I still want it to be independent company. But if he see the un carrier working he may think of holding it a lot longer.

  • longtimeCustomer

    Now AT&T in a couple of years could try again under a possible conservative government. We may wish they had sold to sprint

    • 21stNow

      Nothing will make me wish that T-Mobile were sold to Sprint (or equally bad Dish).

      • Adrayven

        You can say that again! Any sale likely gets ride of John L. When that happens, Uncarrier is out.. THAT will get me to jump ship.. quick.

        Only if they keep John/Uncarrier would I stay. I think many feel that way. They thought a lot of people left the first time.. it’d be mass-exodus next time.

    • UMA_Fan

      Unlikely since its already been reviewed and the governments case has only strengthened since Tmobile has been booming.

    • Stone Cold

      I will never wish this.

  • garblicks

    The way it looking is tmobile usa will get sold to someone. Whom they someone is, is the question. If John can keep the momentum up and these bigger companies continue to ignore tmobile (big red) when the spectrum auction comes up for the 600mhz all hell will break loose if tmobile is about to get enough to make expand the whole nation. Total game changer right there

    • Willie D

      TMobile long term will fail without DT plunking down money for the 600Mhz auction, something they don’t want to pay for. However, the company will be worth more and carry a much higher price tag if they buy spectrum, deploy some of it and then try to sell.

      • vrm

        tmobile can now raise capital on its own. It already did it once to buy 700 mhz spectrum. Don’t spread FUD.

        • philyew

          It is worth remembering that DT traded 7% of their stake in the company by diluting their holding through that share issue in return for raising $1.8 billion towards the 700MHz acquisition.

          With everything else that is going on in the market, it’s hard to work out what that acquisition did for share prices to determine whether the deal was a net loss for DT.

          Almost half the money was raised by making a future payment obligation for whomever they sell to through the sale of senior notes.

          Every transaction of that kind in future will be closely scrutinized by DT to determine whether the value added to the company by spectrum acquisition is worth the reduction in their proportionate holding.

          At some point, of course, they would have to draw the line because, instead of buying 67% of the company, any prospective purchaser would be acquiring a less significant, and consequently less attractive share of the business, burdened with a higher debt loading.

        • Allen Enriquez

          vrm, you just gave me future sights, what if somehow TMUS was able to buy stock from DT, to gain more channel abilities those abilities would be agreed among to share holders and a global mutual agreements can be assured.

        • philyew

          DT owns 67% of TM US and isn’t able to sell it in anything other than a single deal for their entire holding before November 2014. After that, they are free to divest their holding as they see fit.

          The balance of the shares (33%) are owned by diverse shareholders, spread between underwriters, hedge funds and various other parties who were the previous stockholders of MetroPCS (or people to whom those holdings have subsequently been sold), and those who bought the ordinary share issue which took place in October/Novemebr last year.

          There is no significant, coherent group among that 33% which is likely to act with a common purpose to raise the $$$ billions required to take a controlling interest in the company.

        • Allen Enriquez

          Philyew,
          Yes! To bad I don’t have money to pop some money to make this happen! I have that much optimism on TMUS, it will become an ultimate player!

      • vrm

        BTW, sprint now has junk rating and they were gonna raise $45 billion ! It s a joke, NOT !

        • Jay Holm

          Sprint isn’t the one who raised that money, Softbank is.

      • Chardog

        TMUS would be the ones plunking down the money, not DT. DT owns a stake in the company. They are not THE COMPANY anymore.. A specific shareholder doesn’t put out money for a company to buy assets.

        • philyew

          No they don’t, but what ways are there to raise capital to meet expenditure needs?

          You can divert earnings, which denies dividend payments to shareholders – 67% of whom are DT.

          You can create and sell new share issues, which dilute existing holdings. DT’s holding reduced from 74% to 67% as a result of the share issue to support the 700MHz acquisition. It’s no coincidence that their holding remains 67%; that is a significant share of the business in order to remain attractive to future purchasers. In order to maintain that level of control, they would have to buy any future share issues themselves.

          You can enter into future debt, which will consume a larger proportion of the amount that a future purchaser is willing to pay for the company and, in turn, will reduce the income that DT can receive from that sale.

          Any way you stack it, it will cost DT to raise funds to support future capital investment.

        • BigMixxx

          I always thought a diversion of earnings was illegal.

        • philyew

          Divert in the sense of re-investing the earnings in the business, which is normal practice during periods of growth.

        • fsured

          All the business talk with stocks is way over my head. To me it would seem like common sense for shareholders to see the company is doing really well right now and want to put a larger share of earnings back into the company to continue the growth. It doesn’t matter if the shareholder is DT, former MetroPc shareholders, or Pippy Long-stalking. Of course money is a key factor in life and people are greedy and want the returns to stay happy before seeing the benefit of putting the money back into the company. Since corporations are “people”, DT is no different and wants the higher returns to fix their issues across the Atlantic before investing it back in T-Mobile USA.

          And of course this isn’t always true. Independent companies or business owners do it all the time to either stay in operation or expand to the point that they don’t need to reinvest larger earnings. It makes the claim of giving tax breaks to large companies spurring their growth by allowing them to put more earnings back into total bull. Share holders and board will always want their cut of revenue.

          Who knows though. After reading an article that gave information on the new head of DT, I learned he experienced the decay of the company during the At&t attempt by being a part of DT’s effort. His comments about waiting longer for another purchaser is promising since Softbank/Sprint would be like the At&t wrecking ball that hit T-Mobile and likely to fail. Ultimately he doesn’t want that to happen knowing the value of the company would drop and have a worse return on another sale attempt. Sure they would get a high break up fee but can T-Mobile USA make a second come back if that break up fee goes directly to DT and not reinvested to fix the damage of a failed sale? High hopes I know, but maybe if T-Mobile USA continues to break records in profits and subscriber growth he will decide to see how things go far longer than waiting for another potential buyer.

        • philyew

          Unfortunately, as long as DT are on record as wanting to sell their interest in TM US and DT have such a significant position in the company, we will not only have to live with these rumors and discussions, but we will also have to worry about how further investment is to be funded.

          You are of course right that normally it is in the interests of the shareholders to plough earnings back into the company during periods of growth, but that applies only when the shareholder plans to be around long enough to benefit from the investment.

          At some point the need for liquidity in their core European business will lead DT to reduce their holding here. It may take a little longer than they hoped from the Softbank discussions, but I’m pretty sure it will happen.

          What does that mean for further investment? I suspect that unless their Q1 subscriber growth is dramatically greater than has happened in recent quarters and it is maintained into Q2, we may not see any more investment, other than them spending the balance of the $3.8 billion that they raised last year.

        • Chardog

          Only preferred stock investors (if there are any) are specifically owed dividends… Otherwise the board can appropriate earnings as they see fit.. Of course if they overstep their bounds, the stockholders can ultimately dump the board since the board serves their interests.

        • mloudt

          So does Metro shareholders still own 26% or did their shares get reduce also that is what I was wondering?

        • philyew

          I haven’t seen any numbers on that, but have to assume that all shareholdings were proportionately diluted. Otherwise DT would effectively have been selling a part of their initial holding, which they weren’t allowed to do until 18 months after the merger closed.

          Also this was a new share issue, which would inevitably have an effect on all existing shares.

        • Jay Holm

          Some of these comments are very hard to understand, I’m starting to feel like I’m on CNBC’s website!.

        • philyew

          The bottom line is very simple: no matter how TM choose to raise additional funds for further network improvements, it will have a negative impact on DT, at least in the short term.

        • Jay Holm

          Doesn’t Tmo’s stock going up benefit DT?

        • philyew

          Yes, but unless there is a direct and immediate correlation between an investment decision and the stock value increase, the decision to fund the investment can still be considered to diminish the value of DT’s position in the short term, since the stock increase would have happened anyway.

          In the long term, the result of the investment may well improve their position, but in the short term it’s unlikely. The question then becomes, will DT exit the company before the long term benefits are realized?

        • Chardog

          I think the discussion regarding further debt to fund expansion efforts was to go the bond route from what I have heard vs. issuing new shares. Adding more shares just dilutes the value for the shareholders.

        • philyew

          I think you are right that a further share issue would be a problem. Right now, I think it’s important to DT that they maintain a 67% holding, since they may lose potential buyers if their share reduces any further.

          However, I imagine there is also a fine line to tread regarding bond issues as well. If the reported numbers are accurate and the current debt is now around $20 billion, any further increase will be perceived as a substantial risk to a potential new owner, if the company retains its current value of around $25 billion with a margin below the current target level.

      • Allen Enriquez

        Willie D,
        You open interesting Subject, I am not sure who are major share holders of TMUS, besides DT, but if enough share holders decided, they can vote for buying more Towers! The way it will be do will be totally up to them. I am in!

        • philyew

          DT owns 67% of TM US. If they don’t want it, it won’t happen.

        • fsured

          I don’t think towers is the problem they face. Yes they would need towers in areas they currently have no service so they would need to lease space. For the areas covered under 2g they need spectrum signal that can travel distance. They may have no need to buy more towers in these areas if the 600mhz can reach between them and likely would since they are spaced to work on the higher 1700, 1900, and 2100mhz the company uses. Keep in mind the lower the mhz the further the wave length travels.

          In the more urban areas they just need to adapt their hardware in whatever ways needed on the current towers to work with the 600-700mhz. I would hope their first goal is to expand their current Edge/HSPA+/LTE foot print with the lower spectrum so their current customer base has full coverage on the network no matter where they are. That will keep their current customers happier who travel, live in rual areas but travel into urban centers for work, and gain more customers who are skipping T-Mobile because they lack high-speed coverage where they live. Then start dropping the needed cash to buy/lease tower space in new areas they do not service now.

      • yeah right

        Tmobile just needs someone to clunk down the money for 600Mhz spectrum (preferably the highest range – (680-700 mhz to nestle alongside their 700mhz transaction). Whether it is DT themselves or Dish Network in an agreement or Google/Apple/Msoft/Walmart (to be the main supplier of straight talk plans) in a long term agreement.

        Tmobile has been thinking creatively outside of the box and finding a way to guarantee a future competitive playing field is something I think they are hard at work figuring out solutions for the auctions next year.

    • Allen Enriquez

      garblicks,
      Maybe if T-Mobile US raised enough stock, customers, we can, it I mean can buy out, yet we can some how keep our mutual business with Deutsche Telekom!

  • cameo

    I don’t get this. Who is keeping Deutsche Telekom to sell its shares on the NY stock exchange? Not all at once, of course, but a few thousand every day till they are all sold.

    • Turtle6988

      They can not sell there stock in THIS for 18 months after the Merger of TT-Mobile and Metro PCS. The only way they can do it before the 18 months is up is if they sell all there shares to one person/company at one time.

      • UMA_Fan

        I remember reading that but didn’t they just sell some shares so they could fund the Verizon spectrum buy?

        • Chardog

          That was an offering of new stock, not a sale of existing stock. The stock was additional shares of TMUS stock. TMUS is the company. DT just owns a controlling stake in TMUS.

    • bob90210

      Even if you ignore all the rules that companies have to follow for selling stock, it takes about 400 years to sell half a billion shares at 5 thousand a day.

  • Stone Cold

    Just confimation of what we knew they want out of the US but not rushing this.

  • S. Ali

    TMO needs cash. I think 2014 will be good for the company, but 2015 and beyond they have no expansion plans on the books. I’d like to see them go after some regional carriers or partner up with DISH. At worst I’d like to see them start deploying 700mhz in areas here isn’t any interference.

    They need to buy this map: http://allnetlabs.blogspot.com/2013/11/700-mhz-block-owners-map-and-top-2050.html

  • princedannyb

    If DT would use the same uncarrier moves that they used in the us in their other markets they would be very successful.

    • Dexi Prezesowski

      They don’t have to do it in Europe, because the prices there are really cheap. Only Virgin Mobile is close enough to compete with European prices.

    • fsured

      I think in Europe people buy their phones while carriers also do subsidizing if wanted. We Americans are credit crazy and look for lower price without realizing long term we pay more. I think a carrier in Spain voice concern to T-Mobile that Uncarrier and taking phone subsidizing away wouldn’t work. They had attempted it and failed.

      • UMA_Fan

        And they were wrong. T-Mobile has changed the US market since eliminating subsidies.

        • fsured

          That they were. Wonder if they compared how they attempted it to T-Mobile to see where it didn’t work.

        • Allen Enriquez

          UMA_Fan,
          Subsidies killed the hell of T-Mobile US back in the day.

      • Cam Bunton

        Yeah, the market’s pretty competitive here already. I don’t think it’s necessary. For example, we can get a Galaxy Note 3 for £0 up front on a plan from £27 per month ($44 approx) for two years. No extra charges on top. It’s possibly the only thing that’s cheaper here compared to the States.

        • mloudt

          Cam do you got Orange? Contract or no contract? Are you on a Ip5s ELP plan? Enlighten us Cam.

        • Roger Sales

          But only one carrier offers unlimited data from what I understand(apparently T-Mobile used to offer it pre-merger with Orange.) Mergers never equal benefits to consumers, only corporations looking to save money/make more money.

          I don’t know how expensive data is in the UK, care to enlighten me as to whats the going rate compared to the US?

        • Cam Bunton

          Three offers unlimited data as part of its “One Plan”, costs anywhere between £30-£40 depending on which phone you get. T-Mobile UK still offers plans individually from Orange and EE, and has unlimited data available from £17.

          EE is Orange/T-Mobile combined, but offers 4G LTE, which the Orange and T-Mobile plans do not. It’s yet to offer any unlimited plans. Since it’s got the monopoly on 4G at the moment, it’s under no pressure to do so. LTE is still only 14 months old here.

      • Cam Bunton

        Saying that O2 UK launched its Refresh plans here. You pay separately for phone and airtime. Works almost exactly the same way as T-Mobile’s EIP. It’s a 0% interest financing plan, and once you’ve paid off your phone, your monthly spend drops and you can either upgrade, continue or cancel. No longer tied in.

        • fsured

          Thanks for the response.

          Is there a company email to use when sending you articles found on other sites related to T-Mobile that don’t get mentioned here? Or other form of communication? Some of the articles could be of value to readers here who may not visit other tech sites. You would be the judge of deeming them important to post but it couldn’t hurt to pass along the information to you for review.

        • Cam Bunton

          Of course. We have the Submit News page, or just use cam@tmonews.com.

    • rfgenerator

      DT is viewed in Germany much like Verizon and AT&T are viewed here. They are big, expensive, and known for pretty much crappy customer service.

  • Ser8

    If T-mobile USA is more profitable than they expect, they may keep stakes or buy few stakes by a bit.

    I think DT leaving USA will be more sad for US consumers because they, being german, always follow strict codes for ethics and bring their more efficient methods (thanks to thier the rapid development of LTE and HSPA+). They may take our beloved brand, T-mobile away.

  • S. Ali

    Someone call Carlos Slim to buy TMO, he would love to get into the U.S market.

    • mloudt

      Actually Slim said he has no interest in owning a US mobile carrier. Remeber he already owns Tracfone and all its MVNO brands which have over 20 million US wireless customers already. By being a MVNO owner instead of a carrier owner he doesn’t have to worry about maintaining the network or towers or buildout here in America. Slim is doing just fine here in America with his MVNO brands that run on all of the 4 National carriers. So cross Slim off your wish list.

      • philyew

        Not all wireless subscriptions are equal though.

        The ARPU and margins from MVNO subscriptions are considerably lower than those from the main carriers – even TM and Sprint. Earnings from those Tracfone subscriptions are probably equal to about 8 million subscriptions for TM.

    • rfgenerator

      Carlos Slim would be horrible for both customers and employees of TMobile. I worked for a couple of his outfits back in the early 2000′s. Poorly run company, poorly marketed and employees treated like crap.

  • mmunson

    Telefonica might be an alternative to Softbank.

    • Allen Enriquez

      I definitely agree mmunson!
      Telefonica is a fierce competitor one that has been in the game for a long time before the birth of Verizon, Sprint, cricket DT! I wonder what things can they bring to the USA?

      • guidomus_maximus

        Telefonica before the birth of Verizon, ATT, Bell Telephone, Alexander Graham Bell. um. no

  • Paul

    Uh huh, now that TmoUS isn’t the black sheep squandering money. How long until they decide not to sell at all? Likely, they’ll sell and regret it later.

  • jaxgrim

    DT has been a huge part of the problem T-Mobile has had in the US market.

    • philyew

      You mean DT spending over $50 billion to acquire a company that had less than 6 million subscribers, and then chasing that bad investment for the next decade?

      You’re right, but it’s quite possible there wouldn’t be a T-Mobile equivalent in the market now, if they hadn’t done that. Who’s to know how the market would have developed without them?

  • xmiro

    We should crowd source $40B and buy T-Mobile

    • philyew

      I have five bucks to start it off… ;-)

    • Todd

      It’s already “crowdsourced.” It’s called the stock market. :)

      • guidomus_maximus

        funniest post today

      • philyew

        LOL!

        Except that 67% of the shares are tied up with DT, who are only able to sell them in a single transaction until November. ;-)

  • j

    Tmo Motox 4.4 available

  • Ae Tee

    “Deutsche Telekom keen on U.S. exit, but in no longer in a rush to sell”

    But in no longer in. Whaaa?

  • http://about.me/daylondeon Deacon

    i’d like to see TMO USA free from DT .. but not at the expense of Sprint. if there’s any other way fine. DT is on my nerves wanting to get rid of TMO USA though .. i hope they find a way so they can just gtfo of US lol

  • tomarone

    For a long time it was TMo USA has too much debt. So now what’s the problem? They’ve been talking about unloading it for so many years. This is so tired.

  • fsured

    Has anyone else read the recent article from WSJ titled “Parsing SoftBank’s Statements on a Possible T-Mobile Deal”? It is too long of an address to paste here but I found it on Yahoo in their news feed but just scrolling down on the main page.

    I can’t believe Son truly thinks the first point mentioned is valid. What the hell does he think T-Mobile just did where even the largest company, Verizon, is now responding to competition T-Mobile has created?

    “Point 1: There’s not enough competition in the U.S. market.
    The U.S. has one of the world’s highest mobile fees” and the principles of competition aren’t working.”

    It sure wasn’t working 3yrs ago but can’t say it is not now. There is also a follow up article concerning DT’s desire to leave the US market a little further down on the Yahoo page.

    • philyew

      Oh, it isn’t obvious he’s now saying the things that he believes people want to hear…

      After teasing out the principle objections to the takeover through the last two months, he now wants to behave like the Uncarrier…if only market conditions would allow. Yeh right.

      If he’d pressed Sprint to behave more like that in the last 7 months since their takeover was completed, I’d not catch such a huge whiff of bullshit from his latest words.

      It’s sad how the WSJ is acting as a shill for this deal.

      • fsured

        EXACTLY my thoughts on WSJ. I read it and was like wow, someone there must really like Softbank/Sprint or be a mole on their payroll. Hidden under various accounting or departments discretionary slush funds so it’s not apparent of course. Seems whoever writes the articles on Softbank/Sprint and this “merger” is deeply rooted for it to happen. I’m too lazy to look up all the articles and see if it is the same author.

  • Spanky

    Would the FCC really allow the same foreign investor to own two of the four major U.S. wireless carriers? I highly doubt it.

    • philyew

      They wouldn’t allow the same investor, regardless of nationality, to own two of the four major US carriers when AT&T tried.

      The fact is that consolidation of that kind contravenes competitive standards whoever the investor. They don’t have to consider nationality to determine it’s wrong for the US market. Frankly, it would be worrying if they said that was a reason for opposition, as it would imply they might tolerate future consolidation if the investor was American.

  • DirkDigg1er

    It’s all a ruse. Masayoshi Son is doing this for PR. He will continue to attempt T-mobile purchase. He did the same thing last year when battling Dish for control of Sprint. He said he was interested in T-mobile as a Plan B while in the middle of a price war between Crest and Dish for Sprint and Clear.