DT CEO sees light at end of tunnel with T-Mobile/Sprint combo

Timotheus Höttges Deutsche Telekom
DT CEO Tim Höttges said the T-Mobile US/Sprint deal benefits Deutsche Telekom on all levels. (Deutsche Telekom)

The CEO of T-Mobile’s parent company Deutsche Telekom (DT) is ready to take on AT&T and Verizon in more ways than one now that the combination of T-Mobile US and Sprint has been approved by U.S. District Court Judge Victor Marrero.

The $26.5 billion deal has not quite closed, but DT CEO Timotheus Höttges said during DT’s earnings call on Wednesday that getting the deal done puts the company on an equal footing and in a position to ramp up its attacks on the competition in the U.S. DT is based in Bonn, Germany. 

“We see a light at the end of the tunnel … Our attempt is going to be the No. 1 in the U.S.,” he said, adding that they’re now working through the remaining steps of the transaction and hope to close with Sprint parent SoftBank in the second quarter 2020.

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Not surprisingly, he applauded Judge Marrero’s decision, advising anyone who has enough time to “please have a read” of the 179 pages of the document. “I’m very impressed,” said Höttges, who was called as one of the witnesses during the trial in December.  

But even without the merger, T-Mobile has been on solid footing. “For the first time in history, the U.S. team is ahead of AT&T and Verizon,” he said, with T-Mobile’s 600 MHz spectrum already deployed to reach almost 200 million households, which is ahead of the others in 5G.

That's quite different from where DT and T-Mobile US started. Höttges reviewed the “unprecedented” turnaround that occurred in the U.S. over the past decade.

DT started in 2011 with shrinking U.S. operations and plans to sell. Between 2010 and 2019, T-Mobile US, with heavy backing from DT, invested a total of about $54 billion, evolving the company into a “king maker asset” and raising T-Mobile US’ market cap from around $11 billion in 2013 to around $82 billion most recently—more than a 7-fold increase. DT’s stake is worth over $50 billion.

In prepared remarks, he noted that AT&T has a market capitalization of $274 billion and Verizon’s market cap is at $242 billion. The new T-Mobile would have a market cap of almost $120 billion at today’s rate, a difference of almost $120 billion. “I see no reason why this [difference] cannot be reduced considerably,” he said.

He also called out the management team in the U.S. “We have Mike Sievert on board in the United States. Mike masterminded the Un-carrier strategy and is the ideal CEO to lead T-Mobile US into a new era,” he said. “We all knew that a handover was imminent. But the question of when was particularly difficult in this case, because nobody embodies the T brand quite like John Legere, whom we have a great deal to thank for. But we also wanted everyone involved in the merger to know exactly what was going on in this respect.”

At the time Legere’s departure was announced last year, some questioned the timing of it, happening before the start of the trial in Judge Marrero’s courtroom. Legere explained during a conference call in November that with his contract ending in April, one argument at trial could be that T-Mobile’s numerous promises (conditioned on deal approval) could fall by the wayside under potential new leadership that might not be committed to the strategy. They wanted all the chips on the table before the trial began. 

RELATED: NY AG won’t pursue appeal in T-Mobile/Sprint decision

Speaking on CNBC on Wednesday, Höttges declined to comment on whether DT would seek a different price given the value of Sprint has declined since the deal was consummated. Investment analysts have been waiting to hear what T-Mobile and the other players are going to do on that front.

Höttges dodged that question and said it’s the biggest transaction in the telco space in the last 10 years, and “we’re going to build the best 5G network.”  

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