Report: Deutsche Telekom considering T-Mobile IPO or spinoff

Deutsche Telekom is considering an initial public offering or a spinoff of T-Mobile USA in a bid to turn around its struggling U.S. arm and reassure investors, according to a report in the Wall Street Journal.

The report, which cited unnamed sources familiar with the matter, said Deutsche Telekom has held meetings recently with a number of banks to discuss funding an IPO. One scenario under consideration, according to the report, would be to sell about 20 percent of the unit to investors and keep the rest. The main thinking behind such a move would be get additional funding for T-Mobile's network buildout. The carrier is in the midst of finishing its nationwide 3G network on its AWS spectrum, and is planning to upgrade to HSPA+ technology this year.

Other options for the nation's No. 4 carrier--which lost 77,000 subscribers in the third quarter--include a partial spinoff that would give T-Mobile its own balance sheet, or a merger with other wireless operator, which is considered less likely. However, a merger with the likes of Leap Wireless, MetroPCS or Sprint Nextel--the prime candidates--would be fraught with regulatory and technological hurdles, since T-Mobile runs a GSM-based network and these carriers run CDMA-based operations.

T-Mobile has struggled to keep pace with its larger U.S. wireless rivals, particularly AT&T Mobility and Verizon Wireless, despite intense marketing efforts and a strong emphasis on smartphones using Google's Android platform. The operator controls roughly 14 percent of the U.S. market, and ended the third quarter with 33.4 million subscribers. T-Mobile reported net income of $417 million in its most recent quarter, down from $442 million in the year-ago quarter.The carrier's total revenues in the quarter clocked in at $5.38 billion, weaker than its $5.51 billion in the third quarter of 2008.

A Deutsche Telekom spokesman did not immediately respond to a request for comment.

For more:
- see this WSJ article (sub. req.)
- see this Reuters article

Related Articles:
Report: Deutsche Telekom searching for U.S. partners
T-Mobile loses 77,000 subs in Q3
T-Mobile debuts new unlimited calling plans
Report: DT now wants access to Clearwire, MetroPCS spectrum for 4G
Reports: DT not going to make a bid for Sprint