T-Mobile USA deal brings benefits, questions for Deutsche Telekom

While there is huge debate and speculation in the United States following the announcement from AT&T that it intends to pay $39 billion (€27.4 billion) for Deutsche Telekom's T-Mobile USA unit, European interest has been muted.

What is apparent is that Deutsche Telekom (DT) CEO René Obermann, has quickly achieved his top priority for this year by sorting out his troubled US subsidiary. Even better, he has gained a price that will please his shareholders who have been tolerantly waiting for some good news. The primary reason behind Obermann's action would appear to be purely financial, using the proceeds to reduce €13 billion in the company's debt and €5 billion for a share buyback programme.

Speaking to FierceWireless:Europe, Peter Elliott, a communication and media specialist with PA Consulting, said Obermann would be very happy to have sold off a business unit that was disconnected from the group and at best had attained mediocre performance.

However, the venture capitalists and bankers that hold meaningful stakes in DT, including the Blackstone Group, will benefit significantly, according to Elliott. "It's a good financial transaction that benefits the shareholders, boosts the balance sheet, and provides flexibility for forthcoming LTE investments," said Elliott.

But apart from this financial gain, the T-Mobile division of DT now seems left without a meaningful direction. Elliott suggested that DT might be positioning its T-Mobile subsidiary for an era of low returns for European mobile operators and had decided that carrying large amounts of debt was unwise. "Maybe its strategy will be to approach the mobile market differently from other global players," he said.

Having removed itself from the US, seen its UK business absorbed into Orange, the value of the T-Mobile brand starts to become questionable. "Is T-Mobile now just a regional player and will look to boost its presence and profile where it already has operations?" asked Elliott.

For More:
- see this Bloomberg article
- see this Reuters article

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