Deutsche Telekom to avoid answering any cash calls from T-Mobile US: analysts

Tue Oct 14, 2014 12:41pm EDT
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By Harro Ten Wolde and Peter Maushagen

FRANKFURT (Reuters) - Deutsche Telekom had already given up on trying to sell its near 67 percent stake in T-Mobile US TMUS.N before upstart French telecoms firm Iliad (ILD.PA: Quote) dropped its bid on Monday and is now looking to avoid having to stump up more funds for the U.S. mobile network operator, analysts and investors said.

The French low-cost telecoms operator said late on Monday it had abandoned its attempt to buy T-Mobile because of resistance from Deutsche Telekom, becoming the third bidder to drop out in three years.

Competition regulators blocked AT&T's (T.N: Quote) agreed $39 billion deal to take over T-Mobile US in 2011 and also headed off this year's attempt by Sprint (S.N: Quote) and its majority owner Softbank Corp (9984.T: Quote) to merge the two firms.

Deutsche Telekom had hoped to reduce its exposure to the U.S. business before next year's scheduled auction of radio waves which analysts estimate will cost T-Mobile billions of dollars to get the lower-range frequencies it needs to give its mobile network further reach and better compete with rival operators Verizon (VZ.N: Quote), AT&T and Sprint.

"T-Mobile US's credit profile is weaker than Deutsche Telekom's, therefore a sale of T-Mobile US to a strategic partner would have been the preferred option," said Nikolai Lukashevich, a credit analyst at Fitch.

But Deutsche Telekom management, led by Tim Hoettges since he took over as chief executive in January having previously been the group finance chief, has became more confident that a longer stay in the United States business could make sense as T-Mobile's turnaround has made promising progress this year, sources familiar with the matter said last month.

"They believe that T-Mobile can take care of itself, a person close to the German firm's management said. "That has been Tim's objective ever since he merged the company with MetroPCS last year."

Hoettges' strategy for the T-Mobile USA business since he spun it off from its German parent via a reverse takeover by its smaller listed rival MetroPCS, has been "de-risking, self-funding and kingmaker", he told analysts in August.   Continued...

The logo of Deutsche Telekom is pictured on the 266 metre high  "Colonia"  TV tower in the western German city of Cologne March 25, 2013.  REUTERS/Wolfgang Rattay