German incumbent Deutsche Telekom may raise billions of dollars for its US subsidiary, T-Mobile USA, through the issue of bonds or the sale of towers, according to the Financial Times. The FT reported that Deutsche Telekom has held preliminary talks…
German incumbent Deutsche Telekom may raise billions of dollars for its US subsidiary, T-Mobile USA, through the issue of bonds or the sale of towers, according to the Financial Times.
The FT reported that Deutsche Telekom has held preliminary talks with bankers on options for how to keep T-Mobile competitive, after the deal for it to be acquired by AT&T collapsed in December.
The FT cited sources familiar with the company saying that one option discussed was to raise funds through bond issuances. Deutsche Telekom has also reportedly considered the sale of its US towers business, which the FT said could raise between US$1-2bn.
AT&T has agreed to pay a break-up fee to Deutsche Telekom after the deal’s collapse. A Deutsche Telekom spokesman said that this included US$3bn in cash, as well as spectrum and a “roaming rights/wholesale agreement”.
The cash part of break-up fee was paid to Deutsche Telekom in 2011.
The spokesman said that Deutsche Telekom would not comment on rumours or speculation. He repeated the comments made by Deutsche Telekom’s CFO, Tim Hottges, that a sale and lease-back of the towers in the US was one of many possible options.
“After the termination of the agreement T-Mobile USA is better positioned than it was one year ago – thanks to a record high breakup fee. We will now explore possible options for the US business,” the spokesman said.
Carlos Winzer, SVP and telecoms specialist at Moody’s, said that Deutsche Telekom (T-Mobile USA) has a 14% share of the US wireless market, compared to 30% for Verizon Wireless, 29% for AT&T and 15% for Sprint Nextel.
“Going forward, we expect DT to pursue several approaches to boost its competitiveness, including network-sharing deals with other carriers in order to mitigate the capital intensity for T-Mobile USA of funding a 4G rollout,” Winzer said.
Christopher King, a director and telecoms specialist at Stifel Nicolaus, said that Deutsche Telekom would need more than they received through the break-up fee to stay competitive in the long term in the US market.
He added: “A larger question is whether it is too late – part of our evolving thesis is that AT&T and Verizon are the only investable large-cap names in the US in the telecoms space. They’ve won.”
The FT also reported on speculation among industry bankers that Deutsche Telekom could sell its 50% stake in the UK JV Everything Everywhere.
The Deutsche Telekom spokesman said he would make no comment on market speculation.
