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T-Mobile’s German parent is growing to like its American problem child

March 8, 2014
Obsession
Mobile Web
March 8, 2014

Deutsche Telekom, the European telecom colossus that is one-third owned by the German state, is also a key player in the American wireless industry. It’s the biggest shareholder in T-Mobile US, with a 67% stake in the so-called “un-carrier”, which has been shaking up the market in exciting and unusual ways over the past year.

But it’s no secret that for a long time, it’s been looking for a way to get out of the US, where it’s a minor player, so as to better focus on being a major one in Europe. In January, Deutsche Telekom appointed a new CEO, Timotheus Höttges, and this week, he linked up with analysts for the first time after the company delivered its annual results. What he said was intriguing.

Speculation has been rife for months that T-Mobile, the smallest of America’s four wireless carriers, which almost merged with AT&T in 2011, could soon be bought out by Sprint, which is owned by Japan’s Softbank. That would give Deutsche Telekom the exit it has long desired. But over the past year things have changed pretty dramatically for T-Mobile, and suddenly the messages coming out of Deutsche Telekom sound different.

On the analyst call, Höttges praised the “extraordinary” turnaround at T-Mobile US last year, driven by it’s “fantastic” management team. “This is the outcome of the bold Un-carrier strategy and its rigid execution in the market,” he said.

The “un-carrier” label refers to the steps John Legere, T-Mobile US’s media-friendly CEO, has taken distinguish it from competitors by introducing simple and flexible plans, cheap international roaming packages, and offers to pay out early termination fees for people switching across from other carriers. And it’s working: The company added an impressive 1.65 million subscribers in 2013 and even eked out a profit after losing billions of dollars the preceding two years.

“Look, I think the first thing is, in the US, this team is doing a great job,” Höttges said. “There is no urge, no hurry, no—any kind of desperate, a must M&A activity from our side.”

T-Mobile’s resurgence is great news for US consumers and vindicates the government’s decision to block the attempted 2011 takeover by AT&T. But it might also make regulators less likely to sanction a tie-up with Sprint, thus denying Deutsche Telekom a way out of the US. Höttges’s comments are significant, because they suggest he is OK with that.

“If there would be a value-enhancing story to create a kind of super maverick, a really big player who would be much better positioned against AT&T or Verizon, then we always said and we’re not changing that, then we are open to consider a consolidation in the US market.”

Of course, it’s in Deutsche Telekom’s interest to make it sound like it’s not desperate to sell. But for Legere, it still must be nice to hear it.

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