Deutsche Telekom's American adventure draws to an unhappy close

The reaction in Europe to the proposed acquisition of T-Mobile USA by AT&T has been quiet almost to the point of disinterest, with no comment as to the impact that this might have upon T-Mobile's ambitions in Europe or elsewhere.

Of more importance, there has been little analysis as to why this bold adventure by T-Mobile's parent, Deutsche Telekom, failed to succeed in the US market that was, at the time, less advanced than Europe.

To be fair, T-Mobile's venture in the US market in 2001 took place when European mobile operators thought they could conquer the world--as was seen with Vodafone's heavyweight investment in Japan, which later ended with a humiliating exit.

But despite years of mediocre performance, the management of T-Mobile continued to slog onwards hoping that the $35 billion it paid to acquire VoiceStream Wireless in 2001 would eventually reap benefits.

Perhaps the most telling observation by the few European analysts that would comment on the demise of T-Mobile's global ambitions, was that its US subsidiary remained "disconnected" from the marketing and technical skill that the company had gained in Europe--a region that is probably the most competitive in the world.

One keen observer, John Strand of Copenhagen-based Strand Consult, commented that it appeared as if the executives appointed to run T-Mobile USA had simply forgotten to take their previous experiences with them when boarding their transatlantic flights. He also believed that the US subsidiary suffered from an inferiority complex regarding their American competition by failing to take advantage of the financial advantages that GSM provided when competing against operators that had adopted CDMA.

Strand also points to T-Mobile USA's failure to recognise that value-added services would become strategic. Again, it could have used its experience in Europe to be first with an "open garden" approach in the US market.

It also mimicked its competitors by seeing the American market as handset-centric and used the T-Mobile brand in an attempt to address every consumer segment--again, not learning from its various promotional campaigns in its home market.

Overall, the German headquarters of Deutsche Telekom failed to correct a long-standing management problem, with the result that the CEO, René Obermann, had to find someone that would take his sick child from him for a decent price. (Obermann did replace former T-Mobile USA CEO Robert Dotson with Philipp Humm last year though.)

While Obermann will gain praise from Deutsche Telekom's shareholders for extracting $39 billion from AT&T, it shouldn't be forgotten that he, along with his predecessor, now departed, Ron Sommer, share the blame for this foray into the US altogether. They both let T-Mobile USA drift along for 10 years without strong guidance from a highly experienced management team in Bonn, Germany.

However, the sale of T-Mobile USA will face serious examination from the US regulators, and, according to Goldman Sachs, only has a 50 per cent chance of successfully closing.

This unhappy saga may not yet be over for Deutsche Telekom.--Paul