DT open to creating 'super maverick' with T-Mobile US, but is wary of regulatory hurdles
Deutsche Telekom CEO Timotheus Hoettges held the door open to a possible combination between Sprint (NYSE: S) and its T-Mobile US (NYSE:TMUS) unit, but said that U.S. regulators have clearly signaled their skepticism of such a deal.
The DT chief acknowledged that there is a great deal of market speculation about a potential merger between Sprint and T-Mobile and he did not want to "put oil into the fire." However, Hoettges said on a conference call while discussing DT's first-quarter earnings that DT is open to creating a "super maverick" carrier in the U.S.
"I think to really create value in the market at the highest speed, with a better network, with even more spectrum, a combination for instance with one of the players would make a lot of sense to create a super maverick against AT&T (NYSE: T), against this bifurcated market in the U.S," he said.
Yet the DT chief acknowledged that regulators at the FCC and Department of Justice have expressed a desire to maintain four national U.S. carriers. "We're getting signals from the regulatory authority as well as antitrust supervisors that such a merger isn't seen as expedient," Hoettges said. "Against that backdrop, we have to see how we can develop the business so it creates the most value for our shareholders."
Overall, Hoettges said that DT is "very proud" of the growth T-Mobile has seen in the U.S. and that
"this is becoming a self-funding platform which is creating more momentum in the marketplace."
Sprint executives met with banks in April to secure debt arrangements for the transaction, according to a recent Bloomberg report. The report, citing unnamed sources, said that Sprint CFO Joe Euteneuer and Treasurer Greg Block met with six banks to get financing in place for when Sprint decides to make a move on T-Mobile. Sprint is expected to make a formal bid in June or July, the report added.
The report said Sprint parent SoftBank and DT, which controls around 67 percent of T-Mobile, are still debating who would run the combined company, with T-Mobile CEO John Legere seen as the leading candidate. Sprint CEO Dan Hesse has said he would be open to relinquishing control of a combined Sprint and T-Mobile.
Hesse said earlier this week in an interview with Bloomberg TV that the industry would be healthier with a stronger No. 3 player. "You'd have healthier competition with a stronger No. 3," he said. "I can't comment specifically on any speculation with respect to M&A, but I think a stronger No. 3 would be better for consumers."
However, Hesse also said that a lot of regulators have expressed skepticism about combining No. 3 Sprint with T-Mobile. "Theoretically, if such a transaction were to occur, we would have some convincing to do," he said.
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