Deutsche Telekom Looks for US Partners

Caroline Gabriel

Meanwhile, Deutsche Telekom may have hit delays to the merger of its UK unit with Orange UK, but it still seems to be pursuing new options for other wireless subsidiaries. Once again, reports are circulating that the telco will spin off or merge its T-Mobile USA arm.

The Wall Street Journal says TMo (T-Mobile) USA could be fully or partly divested, though most analysts believe a full IPO is unlikely, and that a partial spin-off could be the prelude to a merger deal. Many of the recurring rumors surround a merger with Sprint, though the third US cellco is in poor financial health and still seeking to smooth over problems resulting from its last acquisition, of Nextel. Also, the two cellcos have incompatible networks, although they could converge at the 4G stage if T-Mobile, as also speculated, joins the Clearwire WiMAX joint venture, in which Sprint is the largest shareholder.

Whichever cellco might be interested in TMo, Deutsche Telekom would get various advantages from a partial IPO or spin-off, which would reassure its nervous investors, says the WSJ. Its re-port said DT had held meetings recently with a number of banks to discuss funding an IPO, possibly of about 20% of the firm. This would raise additional funding for TMo’s 3G expansion. Or a partial spin-off would give TMo its own balance sheet. The operator controls roughly 14% of the US market, and ended the third quarter with 33.4m subscribers, reporting net income down from $442m a year earlier to $417m.