The fact that Deutsche Telekom (DT) is under pressure from its two main shareholders to sell or merge T-Mobile UK with 3UK indicates the depth of trouble the subsidiary has sunk to. The two shareholders, the German government and private equity group Blackstone, have called upon DT to make a quick decision over what action to take with its ailing UK mobile operations.
Insiders claim the option of retreating from the UK market was first suggested six months ago, but plummeting asset values made the German government and Blackstone pull back from offering up the UK unit for sale. What now appears most likely, and the most expensive, is to construct a deal with 3UK--which already has a network sharing deal with T-Mobile UK--whereby T-Mobile would be merged with 3.
DT announced last month that its mobile operations were struggling in the US, the UK and Poland, and stated it would restructure the management of its UK subsidiary. While this move is underway, albeit slowly, reports from inside the division claim indecision has spread throughout T-Mobile UK until its future becomes apparent. With its Q1 results scheduled for this week, DT looks set to report writedowns of around €1.8 billion for T-Mobile UK.
While DT seems certain of suffering an embarrassing retreat from the UK--one of Europe's largest and most competitive markets--the company was keen to express it was still committed to remain a major force in the US.
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