Deutsche Telekom AG Friday confirmed it has decided to keep its U.S. wireless arm, T-Mobile USA Inc. The Wall Street Journal earlier Friday reported that the German telecoms company decided to keep the unit, quelling rumors that the fourth-biggest U.S. cellular carrier is up for sale. It cited people familiar with the situation. Deutsche Telekom management has long debated whether to sell T-Mobile USA, merge it with another U.S. wireless operator or keep it and continue to invest billions of dollars in its network.
As recently as May, Deutsche Telekom Chief Executive Kai-Uwe Ricke was floating the idea to investors of selling the U.S. operation, but he decided against it, partly because the response was negative. Deutsche Telekom spokesman Andreas Leigers confirmed remarks made by Ricke in an interview with Frankfurter Allgemeinen Zeitung.
Ricke told the paper he sees no reason to dispose of the U.S. unit. Instead, he said, Deutsche Telekom aims to expand the unit and participate in the sale of new wireless network spectrum next year. “The U.S. is and will continue to be a growth engine for us,” he added.
Some top Deutsche Telekom executives have argued the company should sell T-Mobile USA and use the proceeds to make acquisitions in Europe instead of spending as much as $10 billion during the next few years to build a faster network in the U.S.
Growth at T-Mobile USA has helped Deutsche Telekom to generate more overall sales growth than some European peers, such as Dutch incumbent Royal KPN NV (KPN) and Switzerland’s Swisscom AG (SCM).
Deutsche Telekom’s unit T-Mobile, which operates its wireless networks in Europe and the U.S., posted a 17% rise in second-quarter EBITDA adjusted for special items, to EUR2.5 billion. It gained 1.9 million more customers during the quarter.
T-Mobile USA was again the strongest growth engine with 972,000 subscriber additions, lifting its tally to 19.2 million and boosting its net income 61% to $387 million. Analysts at Independent Research Friday said that Deutsche Telekom’s decision to retain its U.S. unit should moderately help the shares as the unit is the group’s most important growth generator.
But the brokerage, that has an accumulate rating on Deutsche Telekom stock, warns that the decision will limit the company’s financial means for necessary strategic investments in important European markets, possible limiting long-term growth perspectives.
At 0951 GMT, Deutsche Telekom stock were up EUR0.15, or 1% at EUR15.30, while the DAX benchmark index was 1.3% higher.