By Serena Saitto, Jacqueline Simmons and Jeffrey McCracken - Tue Mar 08 14:
29:49 GMT 2011
Deutsche Telekom AG (DTE) has held talks to sell its T-Mobile USA unit to
Sprint Nextel Corp. (S) in exchange for a major stake in the combined entity
, said people with knowledge of the matter.
Talks have been on and off, and a deal may not be reached, said the people,
who spoke on the condition of anonymity because the talks are private. The
companies haven’t been able to agree on the valuation of T-Mobile USA,
which reported a drop in profit in the fourth quarter, the people said.
Sprint rose 6.7 percent to $4.78 in early U.S. trading, and Deutsche Telekom
gained as much as 6.1 percent to 10.22 euros in Frankfurt.
A merger of Sprint and T-Mobile USA would combine the third- and fourth-
largest U.S. wireless providers behind Verizon Wireless and AT&T Inc. (T)
Sprint’s market value was $13.6 billion as of yesterday’s close. T-Mobile
USA may be valued at 16.3 billion euros ($22.6 billion), based on a January
estimate by Michael Kovacocy, an analyst at Evolution Securities in London.
“In general, all options are open in the U.S. -- the sale of the whole
business or of parts,” Deutsche Telekom Chief Financial Officer Timotheus
Hoettges said in an e-mailed response today. He said the company could also
find a partner, sell shares in the market or form a network agreement.
Bill White, a spokesman for Overland Park, Kansas-based Sprint, declined to
A tie-up would allow Bonn-based Deutsche Telekom, Europe’s largest phone
company, to keep a stake in one its biggest markets while making it easier
to finance investments for a faster next-generation network.
T-Mobile, which accounts for about a quarter of Deutsche Telekom’s sales,
has lost customers at an accelerated rate as it trailed rivals in building
out a third-generation mobile network and missed out on being able to sell
Apple Inc.’s iPhone. About 56,000 customers abandoned T-Mobile USA last
year, while Sprint, AT&T and Verizon Wireless all boosted their counts.
Talks have included discussion of Deutsche Telekom owning about 50 percent
of a combined T-Mobile USA-Sprint, one person said. Sprint had revenue of
about $32.6 billion in 2010, while T-Mobile USA recorded revenue of $21.4
T-Mobile USA is also discussing buying wireless spectrum from Clearwire Corp
. (CLWR) as an alternative to a merger with Sprint, two people said.
Deutsche Telekom’s Hoettges said last month that buying U.S. wireless
spectrum from Clearwire is only one option for the German phone company. He
ruled out an outright sale of T-Mobile in the U.S.
“We’re flexibly positioned,” Hoettges said today, adding that Deutsche
Telekom is working on several options. “We’re not under pressure. We want
the best solution.”
Sprint is the majority owner of Kirkland, Washington-based Clearwire.
Sprint is also in talks with LightSquared Inc., a wireless startup founded
by billionaire Philip Falcone and backed by his Harbinger Capital Partners
hedge fund, three people familiar with the talks said last month.
LightSquared, which is seeking to sell 4G capacity in the U.S., may strike a
deal to use Sprint’s cell sites and equipment to build out its network.
Sprint said in December it is going to spend up to $5 billion over the
coming three to five years to upgrade its network to allow it to combine the
disparate spectrum bands it uses onto a single type of base station.
To contact the reporters on this story: Serena Saitto in New York at ssaitto
@bloomberg.net; Jacqueline Simmons in Paris at j*****[email protected];
Jeffrey McCracken in New York at j*********[email protected]
To contact the editor responsible for this story: Jennifer Sondag at jsondag