August 9, 2018 / 8:19 AM / in 3 months

D.Telekom braced for U.S. feedback this month on $26 billion Sprint deal

FRANKFURT (Reuters) - Deutsche Telekom said it expects to get initial feedback in late August from U.S. regulators on the proposed takeover of Sprint Corp by its T-Mobile unit, expressing confidence that the $26 billion deal will go through.

A Deutsche Telekom logo is seen at the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman/Files

Europe’s largest telecoms group, which has a total of 172 million mobile phone subscribers, is pushing for strategic deals as it also invests in networks and customers to sustain growth in its U.S. and European markets.

The Bonn-based group also said on Thursday tough market conditions in the Netherlands reinforced the case for the acquisition of Tele2’s local unit that is under a European Union antitrust review.

The company raised its profit outlook for the second time this year as it reported second-quarter results buoyed by T-Mobile’s strong performance, although this was offset by a drag from the weaker dollar.

It now expects adjusted core earnings (EBITDA) to reach 23.4 billion euros ($27.2 billion) in 2018, up from 23.3 billion previously, at constant exchange rates.

Shares in the group traded flat. Management has struggled to ignite a rally in the stock, which despite yielding 4.6 percent is slightly down this year and trades little changed from its level when the company was floated in 1996.

The T-Mobile-Sprint deal, if approved, would create a business ranking close behind U.S. market leaders AT&T and Verizon , but faces concerns that consumers could lose out in a market dominated by three major players.

Telekom’s Chief Financial Officer Thomas Dannenfeldt told reporters the case in favour of the deal was “as strong as a bear”. The combined company would create jobs from day one and invest in next-generation 5G networks, he added.

MARKET STRENGTH

In the Netherlands, Dannenfeldt expressed confidence that the Tele2 deal would prevail, given the market strength of leading duo KPN and Ziggo.

“If competition is to be invigorated with new convergent products, and above all if the Netherlands wants a fast 5G roll-out, then the country needs a strong third integrated provider,” Dannenfeldt said.

In its home market, Deutsche Telekom is less keen to see new rivals after the president of the Federal Cartel Office, Andreas Mundt, told a newspaper recently he would welcome the entry of a fourth operator when 5G licences are auctioned next year.

United Internet , which runs virtual mobile networks using rented capacity, is seen by many analysts as the leading potential contender.

Additional competition in Germany would make it harder for Telekom to invest in 5G, said Dannenfeldt, given its already heavy commitments to roll out glass-fibre connections to millions of households and businesses.

“Our view remains the same: You can only invest each euro once,” he said.

Commenting on Telekom’s troubled IT services unit T-Systems, Dannenfeldt said the business should return to growth next year. A major contract with a German banking group lifted incoming orders in the second quarter.

The new CEO of T-Systems, Adel Al-Saleh, plans to cut 10,000 jobs as part of a three-year drive to return to profitability. Labour leaders oppose the cuts and Dannenfeldt said negotiations were under way to bridge the differences.

($1 = 0.8613 euros)

Reporting by Douglas Busvine; Editing by Maria Sheahan and David Holmes

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