T-Mo deal drastically changes US market

Michael Carroll
22 Mar 2011

Analysts predict the sale of T-Mobile USA to AT&T will dramatically alter the landscape of the US mobile market.

The deal, agreed over the weekend, will see Deutsche Telekom receive $39 billion in cash and AT&T shares for its US unit, and take an 8% stake in the US carrier. The German incumbent will use €5 billion ($7.1 billion) of the proceeds to buy-back shares, and cut its net debt by €13 billion.

AT&T’s purchase price values T-Mobile USA at around seven times its 2010 ebitda, and brings a curtain down on rampant speculation regarding Deutsche Telekom’s plans for the troubled division.

Thomas Wehmeier, a principal analyst at Informa Telecoms & Media, told TelecomAsia that Deutsche Telekom chief Rene Obermann has pulled “the ace from the pack,” in setting up the sale to AT&T, following weeks of speculation that a merger with Sprint or LightSpeed was in the cards.

“The sale of the unit helps Deutsche Telekom to recoup the value sunk into the business, while retaining a strategic interest in the hugely important US market,” Wehmeier notes, adding. “T-Mobile USA’s standing within the Deutsche Telekom business had veered dramatically in recent years from the star performer in its global portfolio to an isolated and increasingly problematic black sheep.”

Wehmeier also notes the collaboration of Deutsche Telekom with AT&T will provide an “interesting counter-balance to the deepening partnership emerging between Vodafone and Verizon.”

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