Deutsche Telekom has called on Deutsche Bank advisers to study if it is possible for the telecommunications giant to buy Sprint. Sprint is the third largest telecommunications company in the United States. This possibility arises at a time when T-Mobile UK may be tying their operations with Orange to create the biggest mobile phone company in the United Kingdom.
Sprint has a market cap of $10.6 billion and Deutsche Telekom may submit a bid within the next few weeks. Deutsche Telekom has a market cap of $60.5 billion. T-Mobile U.S. continues to struggle against AT&T and Verizon Wireless in retaining customers. Both AT&T and Verizon have advanced 3G networks while T-Mobile has been slow at jumping on the bandwagon.
In order to buy out Sprint, Deutsche Telekom would need a cash injection from shareholders and the German government. The German government owns about 32% in Deutsche Telekom.
The U.K. operations of Deutsche Telekom subsidiary T-Mobile and Orange are planning to merge as long as government regulators approve of the plan. If T-Mobile and Orange merge, then both companies combined will have 28.4 million customers combined and will be making about 9.4 billion Euros per year.
This would make the combined company the largest provider in the United Kingdom. This would even beat Telefonica’s O2 subsidiary. O2 has about 37% of the U.K. mobile phone market. This is the second largest proposed deal that took place in the U.K. this week. Kraft Foods offered £10.2 billion to take over chocolate company Cadbury’s earlier this week too.
Orange CEO Tom Alexander would become the head of the combined CEO. T-Mobile UK head Richard Moat would become the COO of the combined company. Combining the companies would cost roughly £800 million. More details to follow as they come in.
Deutsche Telekom has not been having the best year ever. T-Mobile introduced the G1 mobile phone powered by Android but the sales were not as competitive as the Apple iPhone. On top of weak sales, Deutsche Telekom has had to report a loss of $849 million on their mobile division and write down $2.4 billion in assets related to T-Mobile U.K. T-Mobile USA has seen growth of about 19.5% or about $5.46 billion.
Due to the weakness of T-Mobile U.K., it is rumored that shareholders in the division The Blackstone Group and the German government are pressuring Deutsche to sell that unit off. Recently the company started a marketing campaign where a group of people dance in a train station. T-Mobile is the second largest mobile phone carrier in the United Kingdom, but has a lower average revenue per user than competitors such as Vodafone, O2, and Orange.
Recently T-Mobile hired Richard Moat, the former CEO of Orange in Romania. The HTC G1 on T-Mobile will also have a software upgrade called Cupcake 1.5. This software upgrade adds video capabilities to the phone’s camera and improves GPS/web browsing.
Deutsche Telekom AG (NYSE:DT) subsidiary T-Mobile is the first distributor of the Google Inc. (NASDAQ:GOOG) Android powered phone. T-Mobile stated before that users of the HTC G1 phone be restricted to 1GB of data per month. But then they quickly retracted that cap. T-Mobile will find some other way to manage the network bandwidth without capping early adopters of the HTC G1.
The New York Times’ Saul Hansell sent a message about the 1GB cap. Below is the response from T-Mobile: (more…)
