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DT's Best US Exit Bet

Michelle Donegan
Wireless Bits
Michelle Donegan
10/3/2012

4:40 PM -- For T-Mobile US Inc. parent Deutsche Telekom AG (NYSE: DT), the merger with MetroPCS Inc. (NYSE: PCS) looks like its best bet for an exit from the U.S. market. (See T-Mobile, MetroPCS to Merge.)

But that's not what Deutsche Telekom is saying about the deal. A company spokesman in Germany told Light Reading Mobile that DT has no plan to exit the U.S. market.

The DT spokesman did explain that since the deal with MetroPCS would give DT a stock market listing, the company would gain "flexibility," but that the operator remained committed to the U.S.

That "flexibility" is the real benefit of the deal for Deutsche Telekom. If the merger is approved, then the German giant would finally be able to offload some or all of its U.S. assets, which it has clearly wanted to do for some time. T-Mobile USA is the last mobile operation DT has outside Europe.

In the meantime, the merged entity will have very favorable spectrum holdings for LTE and it can work toward becoming the 4G "value-leader," which would be good for competition in the U.S. market. (See T-Mobile/MetroPCS Wants to be 4G 'Value-Leader'.)

Heavy Reading analyst Berge Ayvazian told Light Reading Mobile yesterday that he thinks the merger with MetroPCS would be an exit strategy. (See Is MetroPCS DT's Magenta Exit?.)

Bengt Nordstrom, founder of consulting firm Northstream , also shared his views on the deal: “DT tried to sell to AT&T because they needed to exit, and to generate cash for their other business units. I have no doubt that they want to exit the U.S. market. They are using the $4 billion penalties from the failed AT&T acquisition to create value for an exit -- I don’t believe they are in the U.S. market for the long term."

“With this deal, they still don’t have the scale to be the number three in the market, and you have to be at least the number three player in any market to survive," he added.

So what do you think? Does the MetroPCS deal mean that Deutsche Telekom is staying or going?

— Michelle Donegan, European Editor, Light Reading Mobile

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krishanguru143
krishanguru143
12/5/2012 | 5:19:48 PM
re: DT's Best US Exit Bet


 

If they are so committed to the US, why did they try to sell T-Mobile USA then?  At the end of the day, if DT can make money they will be happy, if not then they will want to get rid of the asset.  Selling stock is probably easier as they can reduce their stake slowly all while making sure their customers can roam in the US and DT can still make money.

 

 

Selling stock also take getting regulatory approval out of the picture so if DT wants, they can dump and run.  More importantly, they no longer have a vested instance (besides the stock) and do not have any liabilities at all as to how T-Mobile is run or loses money.  We also do not know if DT gets preferred stock or not.  They could be the first to be paid out if bankruptcy is declared, (better) dividends, more voting rights, etc.


 


 

ethertype
ethertype
12/5/2012 | 5:19:46 PM
re: DT's Best US Exit Bet


Agreed.  They may not be completely out for a while, but they'll stop investing their own money and try to start harvesting as soon as possible.  They need the cash.

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