Although T-Mobile was once a drag on earnings it wanted to offload, Deutsche Telekom is now quite pleased with its US subsidiary and has no plans to reduce its stake in the carrier or actively hawk it around for sale.
"You'll find us in a good mood here at Deutsche Telekom," CEO Tim Höttges said to open the carrier's second-quarter earnings call Thursday, attributing his high spirits to strength in the US wireless market and broadband customer growth of 81,000 in the spring quarter in Germany. (See Eurobites: Deutsche Telekom Q2 Boosted by US Unit and DT Offsets Q2 German Slowdown With US Growth.)
Deutsche Telekom AG (NYSE: DT) earnings were buoyed by T-Mobile US Inc. 's own positive second quarter, helping it grow its revenues by 15.3% year-on-year to €17.4 billion (US$18.9 billion). Deutsche Telekom owns 66% of the US carrier. (See US Wireless Operators' Q2 2015 Scorecard, T-Mobile Puts Low-Band to Work and T-Mobile Ups Subscriber Outlook on $361M Q2 Profit.)
Höttges said he is very excited about the performance of T-Mobile as it's added more subscribers than expected and is "capturing the entire growth of the market" without changing its EBITDA target. With regard to a potential merger or acquisition, which used to be Deutsche Telekom's top priority, Höttges said there is no rush and no strategic need to do a deal at this time. (See Not So Fast on Dish/T-Mobile Deal, Analyst Says .)
"We look at T-Mobile as a kingmaker asset, so we remain open to deals that would significantly increase value for shareholders," he added, reiterating there's no need to rush but that there may be opportunities arising over time.
Instead, Höttges' new priority for T-Mobile is the upcoming US low-band spectrum auction. T-Mobile has been lobbying the Federal Communications Commission (FCC) to set aside more than 40MHz of the low-band spectrum for smaller telcos outside of AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ). Höttges echoed this desire but said he didn't think the FCC would offer up more than 20MHz. Either way, he wants the auction to happen as soon as possible. (See FCC Auction Proposal Dings Dish, T-Mobile .)
"This is an event to create a better level playing field in the US and to keep our momentum ticking on the establishment of AT&T and Verizon as we did in the last few years," he said.
As for its home market of Germany, Deutsche Telekom's transition to the new IP via an all-IP network has had a negative impact on the carrier's financials and will continue to have one through next year, after which Höttges said the benefits will start kicking in. The CEO said Deutsche Telekom has a "clear and attractive plan" for its portfolio and also won't undertake M&A outside of its European footprint. (See All-IP DT Could Drive Euro M&A, Say Analysts and Deutsche Telekom Turns On Pan-European IP.)
— Sarah Thomas, , Editorial Operations Director, Light Reading