news


Deutsche Telekom seeks Sprint deal break up fee

Level 3 is spending $6.7bn on the deal

Money in handGerman incumbent Deutsche Telekom is demanding a $1bn break-up fee be made part of any attempted takeover of its US operation T-Mobile by Sprint in order to approve the deal, according to a report from the Wall Street Journal. The payment, from Sprint to Deutsche Telekom, would be required should an agreed deal be derailed; perhaps blocked by regulatory or competition authorities.

In 2011 Deutsche Telekom walked away from the collapsed $39bn takeover of T-Mobile USA by AT&T with $3bn in cash, substantial spectrum assets and a favourable roaming agreement. It was able to invest that sum into its network and has performed well subsequently. From June 2012 to March 2014 the operator increased its subscriber base by 48 per cent, from 33.17 million to 49.08 million, according to figures from Informa’s WCIS Plus. Over the same period Sprint’s subscriber base dropped by 2.8 per cent to 54.45 million, while AT&T’s grew  10.3 per cent to 116.04 million and Verizon Wireless’ by 9.8 per cent to 121.29 million.

And yet the firm’s financial performance has not reflected this trajectory. In Q1 this year, despite claiming to have taken “virtually all of the industry phone growth” in the period, T-Mobile USA posted a $154m loss, down from a $106m profit for the same period in 2013. The firm cited increased customer acquisition costs as having a significant impact on its bottom line.

At the same time, Bloomberg cited unnamed sources close to the carrier in a report that rival operator Sprint was planning to make a bid to acquire T-Mobile USA in June or July this year. The news agency said the operator met with banks in April to make financial arrangements for its offer.


Leave a comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Polls

How have open source groups influenced the development of virtualization in telecoms?

Loading ... Loading ...