Deutsche Telekom CEO: T-Mobile US Can Be a Standalone Business
Timotheus Hoettges, the CEO of Deutsche Telekom, has said that T-Mobile US Inc., wholly owned by Deutsche Telekom, can continue to exist as an independent operator, now that two attempts by the German telecom company to sell it have come to naught. Last week, France-based Iliad SA, owned by billionaire Xavier Niel, made an offer for T-Mobile of approximately US $18 billion including synergies. That was an improvement on its rejected August offer, but it, too, was rejected by Deutsche Telekom as insufficient in relation to T-Mobile’s valuation, which is now US $22.1 billion. Also in August, U.S. operator Sprint, owned by Japan’s Softbank, abandoned its effort to acquire T-Mobile due to regulatory concerns. In an interview in Hamburg, Hoettges said, “We are looking into the options, but nevertheless we have an independent, self-funding future for our activities in the U.S. It is a great business, it is a great perspective, we could have a lot of potential to realize in the future.”
Deutsche Telekom is having to accept that it may not be able to divest itself of its U.S. mobile operator business. That is not necessarily a bad thing, considering that T-Mobile’s aggressive “un-carrier” strategy appears to working; in August it added 2.75 million new customers for its best month ever. While it is likely the case that only by merging with another player could fourth-place T-Mobile pose a genuine challenge to the big two, Verizon and AT&T, T-Mobile is still a vital, growing business that Deutsche Telekom quite rightly perceives as an asset rather than a liability. Still, in order to reach its potential, T-Mobile will need some substantial investment in its network, acquiring new spectrum and improving its current infrastructure, so that its attractive deals can be accompanied by equally attractive quality of service. If Deutsche Telekom is truly in it for the long haul, it will need to spend money to make money. Of course, if satellite TV provider Dish Network Corp. were to make an offer for T-Mobile in the future—which its CEO, Charlie Ergen, has mentioned as a possibility—everything could change.
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The Tarifica Telecom Industry Research Department