Deutsche Telekom CEO Timotheus Hoettges said that T-Mobile US (NYSE:TMUS) can fund purchases of spectrum in upcoming U.S. auctions by itself, taking pressure off the parent to inject funds into T-Mobile as it invests to beef up its network.
On DT's third-quarter earnings conference call, Hoettges said he is confident the U.S. business would be able to buy spectrum by issuing new shares or bonds itself. "We consistently follow our strategy of de-risking, self-funding," he said, according to Reuters. "I am convinced that T-Mobile US will continue to be a source of great satisfaction for us."
Analysts at credit rating agency Fitch estimate that T-Mobile may have to spend at least $7 billion on spectrum in the coming years. T-Mobile is likely to bid on spectrum during this year's AWS-3 FCC spectrum auction and in the 600 MHz incentive auction of broadcast TV airwaves, scheduled for early 2016.
T-Mobile US accounts for about a third of Deutsche Telekom's total revenues and a fifth of its core profits. The company was for years a drag on DT's cash flow, but has added nearly 10 million net new customers in the last six quarters. In the third quarter, T-Mobile posted a net loss of $94 million, wider than the $36 million net loss in the year-ago period, in part because of higher costs of integrating the MetroPCS network.
DT expects T-Mobile's earnings to improve over the next several quarters. "In the same way as revenue increases when the number of customers grows, so earnings will improve in the next few quarters as revenue rises," CFO Thomas Dannenfeldt told reporters on a conference call, according to Reuters.
Hoettges called the U.S. unit "a great thing what we are experiencing here" and praised the performance of CEO John Legere and CMO Mike Sievert in particular. Hoettges called T-Mobile's "uncarrier" branding "one of the most impressive marketing stories I have ever seen," at least in telecommunications. "I am very lucky that I am part of this success here," he said.
This summer T-Mobile abandoned plans to merge with Sprint (NYSE: S) after a lengthy courtship, yet Hoettges said he thinks that the continued dominance of AT&T Mobility (NYSE: T) and Verizon Wireless (NYSE: VZ) is not a good thing for the industry. "I think this bifurcation of Verizon and AT&T in the long term is not healthy," he said.
However, he said he does not think U.S. regulators would do much about the market structure. Long-term, he said, consolidation makes sense.
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