Deutsche Telekom Chief Executive Officer Rene Obermann said Thursday a merger of the T-Mobile USA division is an option, while ruling out revisiting a complete sale after its fallout with AT&T last year.
“We do not exclude any option for the T-Mobile unit in the U.S., also not a merger,” Obermann told shareholers Thursday at an annual meeting in Cologne. “A complete sale is unlikely. You understand that I can't say more in public on T- Mobile USA.”
The comments are the clearest yet on Deutsche Telekom's plan to hold onto the asset — at least partially — five months after the $39 billion proposed sale of T-Mobile to AT&T collapsed because of regulatory resistance. Deutsche Telekom is discussing a merger of T-Mobile with MetroPCS Communications Inc., with other options including an initial public offering, people familiar with the matter said this month.
“We don't see any value creation by T-Mobile USA if it stays as a stand-alone company,” said Alexandre Iatrides, an analyst in Paris. “The alternatives would be a merger or some kind of network-sharing agreement with MetroPCS or Sprint Nextel.”
Verizon Wireless and AT&T serve about 60 percent of U.S. wireless subscribers, according to data compiled by Bloomberg. T-Mobile accounts for 9.5 percent, and MetroPCS has 2.7 percent. A combination of T-Mobile and AT&T would have created the largest U.S. mobile-phone operator.
“The failed sale of Deutsche Telekom's U.S. subsidiary is a harsh setback in the attempt to clean up the pile of broken glass of the failed expansion in foreign countries.”, Klaus Kaldemorgen of DWS Investment, a unit of Deutsche Bank AG, said at the Deutsche Telekom's shareholders meeting Thursday. “One cannot discern a plan B for the U.S. business.”
The uncertainty about T-Mobile's future has affected the unit's business, Obermann said Thursday.
“We must find other ways to increase the return on our capital, or to reduce our capital investment,” he said. “Believe me, we are really working very hard on this, but we are not going to make a snapshot.”
In the first quarter, T-Mobile increased profit as prepaid clients helped offset the loss of 510,000 contract customers. T- Mobile has announced at least 2,800 jobs in the past months as it closes some call centers and reorganizes departments across the company.
Deutsche Telekom is considering a stock-swap transaction with MetroPCS Communications that would give the Bonn-based company control over the combined entity, which would be publicly listed, people familiar with the matter said this month.
The German company also has hired bankers, including TAP Advisors, to sell a large portion of its network towers and has said it will spend $4 billion over two years on the construction of an LTE wireless network.
“We are investing in modernizing the networks and are now developing an LTE network,” Obermann said Thursday.