Deutsche Telekom's European investment plans will crumble if AT&T deal fails


News that US Department of Justice (DOJ) filed an antitrust complaint in federal court to block AT&T's proposed $39 billion acquisition of T-Mobile USA seems to have taken the management of both companies by complete surprise.

Such was the confidence that the deal would go ahead, Deutsche Telekom (DT) CEO Rene Obermann and his team hadn't prepared alternative scenarios if its $39 billion sale to AT&T fell apart.

Maybe the prospect of devising such an option was too frightening for the DT management to contemplate, given they are few and all unattractive.

But the ramifications for DT's plans in Europe, if the deal does fail, are enormous.

The company has plans to invest the proceeds from the AT&T deal to dramatically overhaul in European businesses, invest in new services and technology, and recapture a market-leading position.

Not only are these plans in jeopardy, but the company faces management paralysis until some resolution becomes apparent.  

"What it now means for the DT group is a continued period of uncertainty, a dangerous situation for a company undergoing a transition," Thomas Wehmeier, senior analyst with Informa Telecoms & Media, told FierceWireless:Europe. "There will be confusion and delay within its European operations, and the group may find it difficult to make the investments that are required in the many areas they wish to pursue, and remain competitive."

"There is now a storm cloud over the company," Wehmeier said. "Every month and quarter that this issue remains means management will be distracted from making focused decision regarding Europe."

This pessimistic viewpoint was echoed by Jan Dawson, chief telecoms analyst with Ovum. "The picture for DT is now very different from what they thought only a few days ago, and could have a huge negative impact on what they have planned in Europe," he said.

Prior to this DOJ action, Dawson rated the chances of the deal proceeding at 50:50. He now believes the chances are considerable lower, rating it at 90:10 against the deal being approved.

Informa's Wehmeier also believes there is a high chance that the deal could stumble, but maintains that the two firms have huge commitment to making it happen. "It's the start of the next chapter," he said. "The discussions have moved from the meeting rooms of the DOJ and the FCC to the court room."

Given the lack of alternatives, seemingly the current thinking from within AT&T and DT is Plan B must be to make the original Plan A work.

Not very imaginative, but the choices are few if not zero. --Paul

Suggested Articles

Wireless operators can provide 5G services with spectrum bands both above and below 6 GHz—but that doesn't mean that all countries will let them.

Here are the stories we’re tracking today.

The 5G Mobile Network Architecture research project will implement two 5G use cases in real-world test beds.