Deutsche Telekom

Verizon's Alltel acquisition: What are the ramifications?

Sue Marek — Fri, 06 Jun 2008 11:32:03 -0400

Now that analysts and industry pundits have had 24 hours to rehash yesterday's announcement about Verizon's $28.1 billion acquisition of Alltel, there is lots of debate about how this deal will impact the industry and Alltel customers. Here's a roundup of the latest:

Alltel subscribers: Alltel customers are worried about Verizon's commitment to rural coverage and whether the deal will lead to reduced competition in rural markets. They are also concerned about the possible demise of the firm's popular MyCircle's rate plan that lets them have unlimited calling to 5, 10 or 20 numbers for a monthly fee. Alltel CEO Scott Ford says that there will be not rate plan changes right away.

What does this mean for other operators? Most of the speculation surrounds Sprint, which now moves to a more distant third place behind Verizon and AT&T. Some believe Verizon's acquisition of Alltel increases the chance that Sprint will be acquired by Deutsche Telekom. Technology Business Research believes the acquisition of Alltel will place new burdens on AT&T and cause it to search for possible acquisition targets. That may be tough since prospects are limited. Possible acquisition targets would include U.S. Cellular, Centennial, and unlimited local service providers Leap Wireless and MetroPCS.

For more:
- see this AP story
- see this Chicago Tribune story
- read this Sprint Connections story

Related stories:
Verizon finally moves back into No. 1 slot. Read this Verizon acquires Alltel opinion
Verizon snaps up Alltel for $28.1B. Read this Verizon acquires Alltel story

DT chief fuels Sprint acquisition rumors

Fri, 09 May 2008 06:59:56 -0400

Will Deutsche Telekom make a move on Sprint Nextel, or are there too many hurdles to overcome for such a supersized intermarket merger?

The German telco has, for the most part, been typically stoic in its lack of comment about a possible deal. But there has been plenty of speculation from analysts and competitors about DT's ability--or inability--to merge two incompatible technologies, not to mention cultures.

DT CEO René Obermann may have revealed the telco's hand a bit Thursday when he told analysts during the company's earnings call that, "We can't rule out acquisitions which, when evaluated under strict financial and business criteria, would bring a clear profit and return on investment. That we must do and we will continue to do in the future."

A person briefed on the situation told the International Herald Tribune that the German company and Sprint had been in talks about a possible takeover for two weeks. A deal could be worth some $52 billion, leapfrogging T-Mobile from third to first in the U.S. mobile market ahead of AT&T and Verizon. The Trib also reported the two companies already had approached the FCC about possible objections to the deal. Sprechen Sie Deutsches im Kansas City?

T-Mobile USA, by the way, reported it added one million customers in the first quarter, bringing it over the 30 million subscriber mark. -Dan

For more:
- read the International Herald Tribune's story

Report: Sprint considers Nextel spin-off

Tue, 06 May 2008 06:59:58 -0400

Yesterday, the rumor mill claimed that T-Mobile USA parent company Deutsche Telekom was mulling a bid for Sprint Nextel. Now a report in the Wall Street Journal says Sprint is considering a plan to spin-off or sell its Nextel unit. The report, however, claims that no particular deal is forthcoming, the consideration comes during a strategic review process, which could mean the carrier is just reviewing its options. One of the options is selling the Nextel unit back to a group of investors organized by Nextel co-founder Morgan O'Brien, who now runs public safety company Cyren Call. Current valuations of Nextel put it at between $5 billion and $16 billion, far less than the $35 billion Sprint spent in 2005 to acquire it.

For more on the rumored spin-off:
- read this report from the WSJ (sub. req.)

T-Mobile USA to merge with Sprint Nextel?

Mon, 05 May 2008 06:59:58 -0400

According to a report from the Wall Street Journal, T-Mobile USA parent company Deutsche Telekom is mulling a bid to acquire Sprint Nextel. The acquisition would lead to a combined T-Mobile USA and Sprint Nextel, which would make for the largest wireless carrier in the U.S. Sprint Nextel boasts a market capitalization of $22 billion after its revenue fell to $40.1 billion in 2007 from $41 billion a year earlier--the operator also booked a net loss of $29.5 billion in the fourth quarter due to a non-cash goodwill impairment charge of $29.7 billion. At the end of its fourth quarter, Sprint was still the No. 3 carrier with 53.8 million subscribers. With 28.7 million customers at the end of December, T-Mobile USA lags a distant fourth, but a merger with Sprint would roughly triple its subscriber base and vault the company ahead of AT&T and Verizon Wireless.

Sprint uses CDMA technology and T-Mobile USA uses GSM, which has led some to predict LTE could be the technology that bridges the two carriers. That, of course, leaves Sprint's WiMAX build out plans in the lurch. Would regulators really allow the No. 3 and No. 4 U.S. carriers merge?

For more on the report:
- read the full article at WSJ (sub. req.)

Sprint, it's time to take the money

Mon, 10 Mar 2008 07:59:59 -0400

Sprint, it's time to take the money

The rumors are rife over acquisition and spin-off scenarios for troubled Sprint. Deutsche Telekom might make a play for Sprint, Sprint may spin off Nextel and Verizon might try to buy Sprint.

The bottom line is: There is no easy fix for Sprint. CEO Dan Hesse recently admitted that the problems facing the operator are more difficult than he anticipated. He's already done a lot internally, cutting 4,000 jobs, reducing the number of distribution points and consolidating the the company's headquarters. Now it's time to make the drastic moves, and one has to be looking for outside investments.

Back in December, Sprint reportedly wouldn't even entertain a $5-billion investment from SK Telecom and PE firm Providence Equity Partners that included installing Sprint's former chairman Tim Donahue as CEO of the company (I have a feeling it was installing Donahue that was the sticking point since former Sprint and Nextel executives love to point the finger at who messed this acquisition up). Now it's time to start courting the PE firms and foreign investors who want a piece of the U.S. wireless market.

Many private equity firms have funds to spend, and they want to spend it in the telecom industry these days. We've seen some high-profile private equity moves in telecom recently, including the buyouts ofÃ‚Â Covad Communications, Bell CanadaÃ‚Â and Alltel Wireless.Ã‚Â

Analysts predict that with the economy teetering, PE firms will look to telecom carriers and vendors who have high cash flow and manageable debt as new investment opportunities. The beauty of privately led leveraged buyouts is that investment groups have the ability to reshape the business in a manner that previous management and relationships could not and without investors breathing down their necks. These companies have the financial capability to buy other companies that will complement some of these businesses. They can sell non-core businesses and add to the core capabilities. The net result can be a high-value company. -Lynnette

Sprint's troubles inspire rumor mill

Thu, 06 Mar 2008 06:59:58 -0500

Sprint's recent troubles have made plenty of investors and subscribers uneasy, which has led to a number of acquisition-related rumors and highly speculative analysis. Here are three:

Sprint to spin-off Nextel

According to a Seeking Alpha report, Sprint Nextel has hired Morgan Stanley to implement board director Ralph Whitworth's plan to spin-off Nextel. Rumor has it the spin-off will be announced within the next two to four weeks. Most of Sprint's trouble can be traced back to the Nextel acquisition in the first place.

T-Mobile may acquire Sprint

Merrill Lynch analysts told the Kansas City Star today that Deutsche Telekom, owner of T-Mobile USA, might be considering a takeover of Sprint in an attempt to prevent a price war between the mobile carriers. Sprint's low share price and the weakness of the U.S. dollar both favor the European company, but Merrill Lynch said it is not privy to any inside information--it's just speculating.

Should Verizon buy Sprint?

Last week the Wall Street Journal's deals blog considered whether Verizon should acquire Sprint. The post brings up Verizon's stellar decision not to make a bid for Sprint back in 2004.

What do you think? Do any of these ring true?

For more on the rumor mill's field day with Sprint:
- read this post about spinning off Nextel
- check out this article about T-Mobile's interest
- read this blog post from the WSJ about Verizon

Rumor Mill: T-Mobile USA to announce 3G plans

Mon, 26 Nov 2007 06:59:58 -0500

According to a report in the Inquirer, T-Mobile USA will make a major announcement about its 3G network rollout on December 6. The news is a long time coming: We reported in December of 2005 that T-Mobile USA would launch its 3G network by the end of 2006. Now it seems the carrier may make good on that promise--a year late.

Last October the carrier said it planned to spend nearly $2.7 billion on its 3G network rollout, which will make use of the $4.2 billion worth of spectrum it won in the AWS auction. T-Mobile International's CEO Rene Obermann said at the time: "We're looking at the area of user generated content... where we could leverage or basically mobilize the trends which we can see on websites such as MySpace, YouTube or others... as well as data management scenarios and consumer mobile email. We want to leverage existing behavior... when it comes to mobile music and TV, I wouldn't consider them big revenue generators."

T-Mobile USA started selling its first 3G device this past October in select retail stores in New York City: The Samsung T639, a quad-band GSM/EDGE and WCDMA 1700 MHz clamshell. It's about time that handset had a nationwide network.

For more on the rumor:
- read the Inquirer's speculative article

T-Mobile USA adds 857,000 net subs

Thu, 08 Nov 2007 06:59:58 -0500

T-Mobile USA posted solid metrics for its third quarter thanks in part to its successful MyFaves service. By September 30 of this year, T-Mobile USA's MyFaves program had 3.6 million users, five times as many as it did at the end of last year. Revenue at T-Mobile USA rose by 4.5 percent since the beginning of the year to about $15.5 billion.

Subscribers: During its third quarter T-Mobile USA added 557,000 contract subscribers and 300,000 prepay subscribers for a total of 857,000 net subscriber adds and a total base of 27.7 million. Since the beginning of the year the carrier has added 2.7 million net subscribers, 73 percent of whom are contract customers.Ã‚Â (See chart to compare previous quarters.)

ARPU: T-Mobile USA posted average revenue per userÃ‚Â (ARPU)Ã‚Â at $55.60, or $61.50 for contract subscribers and $27.80 for prepay users. Non-voice services made up about 16 percent of total ARPU. Total revenues were 3.6 billion. (See chart to compare previous quarters.)

Churn: T-Mobile USA's average monthly churn came out to 2.9 percent during the third quarter, or about 2 percent for contract subscribers. (See chart to compare previous quarters.)

For more on T-Mobile USA's Q3:
- read this press release

T-Mobile USA to pro-rate ETFs, too

Thu, 08 Nov 2007 06:59:55 -0500

First Verizon Wireless pro-rated their early termination fees, then AT&T did. Today both Sprint Nextel and T-Mobile USA have committed to declining their ETFs over the course of a customer's contract starting sometime next year. Neither carrier would discuss the specifics of the plan, but T-Mobile USA said the new policy would only affect new customers and existing customers who change their contracts with the carrier.

For more on T-Mobile USA's plan:
- read this article from RCRNews

Related Articles:
FCC: ETF regulation coming this year Article
Websites alleviating ETF woes Article
Should states oversee ETFs? Article

Will we see international buying sprees?

Mon, 01 Oct 2007 06:59:59 -0400

Will we see international buying sprees?
Are we witnessing a mood swing among operators when it comes to global consolidation? It was in 2002 when major operators primarily in Europe were experiencing hangovers after their extravagant buying sprees in the late 1990s and 2000. Global operators such as Vodafone, Deutsche Telekom and France Telecom took billions in write-downs while U.S. operators retreated from their international holdings--many in Latin America--selling off their stakes as they faced financial pressure at home. Ã‚Â

AT&T was one of those operators that sold off its international assets during the last five years as it shored up its U.S. acquisitions. The operator is now looking to acquire companies abroad to offer telecom services around the world to consumers and business users. AT&T particularly has its sights on India, where operators are reporting leading growth--about 6 million new subscribers a month. Vodafone has already gotten its hands on an $11.1 billion stake in India's Hutchison Essar.

Indeed, it appears this next round of global expansion fever will focus on emerging markets, where growth is exploding. The demand for wireless services in India, China, Vietnam, Saudi Arabia, Dubai, Qatar and Kuwait is increasing as multinational corporations stationed there need advanced data and voice services, and some regulatory environments begin to welcome foreign investors.

Still, we won't witness the high-flying deals we saw in the late 1990s, when financiers welcomed blind consolidation for the sake of growth. Vodafone was able to leverage its fat stock price then as currency to consummate some of the biggest corporate mergers in history. Operators are being rational. I suspect that is why Millicom International, which owns operations in some 16 developing countries, hasn't been snapped up yet. China Mobile was supposed to buy the company last year, but the deal fell apart when the two companies couldn't agree on a final price tag. China Mobile was willing to pay $5.3 billion for Millicom.

Interestingly, WiMAX could prove to be the vehicle that gets operators in the international door. Not only are players in developing countries looking to deploy WiMAX, but operators in more developed countries such as Taiwan are deploying networks too. You can bet they all will be looking for some outside money to help build out their networks. -Lynnette