Following months of speculation, Deutsche Telekom’s CEO has told a German newspaper that the company has no intention of selling off its US mobile operation. This makes sense as, although a number of reasons to offload the unit have been suggested, losing T-Mobile USA would be a blow to Deutsche Telekom.
Deutsche Telekom has stated that it does not intend to sell off T-Mobile USA.
In an interview with the Frankfurter Allgemeine Zeitung, Deutsche Telekom chief executive Kai-Uwe Ricke said the company sees no reason to sell T-Mobile USA. For months there has been speculation that it would offload the US unit for an estimated price of $30 billion, or merge it with another US mobile operator.
Mr Ricke also told the paper that T-Mobile USA would bid for spectrum for new third-generation mobile data services in an auction next year.
There were a number of reasons why it was suggested that the carrier should offload the unit. A sale would make huge inroads into reducing its colossal debt burden, which now stands at a hefty E44.53 billion ($55.38 billion).
Another reason is that Deutsche Telekom faces having to make a huge investment in T-Mobile USA, possibly as much as $10 billion, in order to turn its US mobile network into a 3G-compatible operation.
The last reason is more strategic. The US mobile landscape has undergone a dramatic sea-change in the past two years. Where there were once six major operators, this has now been whittled down to four, and T-Mobile USA is a distant fourth behind the top three.
The number-one US mobile operator is Cingular Wireless with a customer base of 51.6 million. Second is Verizon Wireless with 47.4 million customers, and in third place is Sprint Nextel, which currently has roughly 40 million mobile subscribers.
T-Mobile USA has a US subscriber base of only 19.2 million customers, and no powerful local partners to share the financial burden of operating in the world’s most valuable market-place. Its comparatively small size has prompted concerns that the unit does not have the scale to compete effectively. However, it did add 972,000 new customers in the most recent quarter.
The loss of T-Mobile USA would be a heavy blow for Deutsche Telekom to bear because the mobile unit is its principle growth driver, and its US operation is its fastest-growing unit. The unit has since overtaken the carrier’s domestic mobile unit in terms of revenue.