T-Mobile and Sprint Deutsche Telekom CEO pleased about merger
Bonn · Deutsche Telekom CEO Timotheus Höttges is happy about the merger of U.S. subsidiary T-Mobile with Sprint and says “We want to grow on both sides of the Atlantic.”
During the telephone conference call with journalists on Monday, Deutsche Telekom CEO Timotheus Höttges received a message of congratulations on his phone from former DT CEO Ron Sommer, and this obviously meant a lot to him. The predecessor from years back was heavily criticized for the high purchase price when DT took a step into the U.S. market in 2001. On Sunday evening, DT announced that U.S. subsidiary T-Mobile would merge with competitor Sprint for a deal worth around $150 billion (123.6 billion euros). This will position the company on a level with the two industry leaders, AT&T and Verizon.
“You see here a happy CEO at Deutsche Telekom,” said Höttges. Over the course of seven years, he had worked towards a merger three times. As recently as last November, talks failed because of issues with valuation. The fact that the merger has finally worked will allow DT to “rise to a new dimension”: “We want to grow on both sides of the Atlantic.” The debt of DT would rise temporarily but significantly if the deal is approved later this year. It could return to normal again by 2021.
The planned network expansion in Europe should not be slowed down by the activities in the U.S. "The investment commitments for the fiber, which we have announced and planned in Europe, can be implemented solidly," said Höttges. Of course, one has to take into account that the merger will tie up management capacity over the next three to five years. This means there will be no further big acquisitions in the near future. In Europe there are two more mergers in the Netherlands and Austria in the approval process. The company also sees itself well positioned to implement the next 5G mobile communications generation in Europe.
High hurdles to approval
Before a merger can be implemented, companies in the U.S. face major hurdles to secure approval. In addition to the antitrust and telecommunications authorities, security agencies, and the states, also U.S. President Donald Trump must give approval. Höttges: "We are optimistic that we will succeed." He expects the entire approval process to take a year. He believes that U.S. framework conditions and regulatory models for broadband expansion can serve as models for Europe. "I believe that the American system is more successful than the European system," said Höttges.
Shares remain largely unchanged
A key to the current merger development was apparently a change of mind by Softbank CEO Masayoshi Son. Last fall, he seemed not ready to give up voting control over the joint venture. But, as Höttges described, it was also difficult to make a fair valuation for both companies at that time, because stock prices were inflated by the idea of the merger. After that deal was cancelled, share prices returned to normal.
Höttges praised the Japanese entrepreneur for his approval. The DT share started Monday’s trading with a jump of 3.2 percent to 15.01 euros and lost some of its gain to close at 14.54 euros at the end of the day, leaving it largely unchanged.
(Orig. text: Claudia Mahnke / Translation: ck)
