T-Mobile US up for Grabs?

At least part of T-Mobile US (formerly named VoiceStream) will be sold to another U.S. mobile company by its parent Deutsche Telekom AG (NYSE: DT), according to a leading source within the German banking community. "[Telekom] needs to do something dramatic," says the contact, who wishes to remain anonymous.

More dramatic than changing the operator's name, that is (see T-Mobile Is Go).

The capital market is expected to heave a sigh of relief and pour itself a large Schnapps if Telekom does sell, as that would help lighten the German giant's enormous debt load and catapult T-Mobile US out of the number six spot in the mobile operator pecking order.

Telekom has racked up €67 billion (same figure in US$) in debt (all its credit cards are full), a sum that commanded interest payments of around €5 billion last year -- nearly half of its operating cash flow of €11.9 billion. As might be expected, DT is already offering -- or, according to the banks, about to offer -- a number of assets for sale. These include its cable TV business, its satellite holdings, its subsidiaries in Asia, its tower business, and sections of its real estate.

However, the successful sale of all of these is not likely to raise more than around €13 billion in total, according to number crunchers -- and that ain't enough to see Telekom out of the woods. The only asset, apart from T-Mobile US, that might raise a significant sum is T-Systems Inc., bought from DaimlerChrysler Services for €10 billion in 2001. However, even if a buyer could be found it is unlikely DT would get its money back on that particular subsidiary.

Telekom's stated aim is to see its debt reduced to around €50 billion by the end of 2003. Recently appointed interim CEO, Helmut Sihler, said T-Mobile US will not be sold, according to a report in the German daily, the Frankfurter Allgemeine Zeitung. However, given that "cost cutting and debt reduction" have "top priority" at DT, it does seem likely that either AT&T Wireless Services Inc. (NYSE: AWE) or Cingular Wireless will have a bid accepted some time soon.

— Ouida Taaffe, special to Unstrung
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