Deutsche Telekom CEO Tim Hoettges said the telecom operator is aiming to become market leader in the United States.
Tim Hoettges expressed happiness because the completion of the $26 billion all-stock deal between T-Mobile US to take over Sprint is within reach. The combination of T-Mobile US and Sprint, the third and fourth largest mobile operators, will assist Deutsche Telekom, the majority owner of the combined entity, to take on AT&T and Verizon.
Recently, New York judge threw out a petition brought by a dozen U.S. states to block the deal. Tim Hoettges today said the new T-Mobile would go on the attack and look to close a valuation gap with AT&T and Verizon, Reuters reported.
“We have the chance to become No.1 in the United States, to overtake AT&T and Verizon. That is our ambition,” Hoettges told reporters in Bonn after Deutsche Telekom reported record annual results in its 25th year as a listed company.
Tim Hoettges, 57, has campaigned for seven years to do a U.S. deal that, on completion, would create a transatlantic business with $120 billion in revenues and 270 million customers. In April 2018, T-Mobile and Sprint, controlled by Japan’s Softbank, agreed to a $26 billion all-stock deal.
With last week’s New York court ruling in favor of the deal, Tim Hoettges expects it to close by April 1, subject to resolving outstanding regulatory and legal issues.
Importantly, synergies of $43 billion targeted in the original merger remained intact, Tim Hoettges said. Once completed, the German group would own 42 percent of the new T-Mobile but have a voting stake of 67 percent and control of the board.
Tim Hoettges said the new T-Mobile would have a market value on paper of around $120 billion. That compares with $274 billion for AT&T and $242 billion for Verizon.
The three main U.S. wireless carriers would have similar customer numbers of between 140 million and 150 million, Tim Hoettges added: “That puts us on an equal footing and in a position to ramp up attacks on the competition.”
Deutsche Telekom forecast earnings of 25.5 billion euros or $27.5 billion, representing a slowdown in growth to 3 percent in 2020. That guidance does not take into account the impact of the U.S. merger and Deutsche Telekom will revise its outlook once it goes through.
Deutsche Telekom reduced its net debt by 2.8 billion euros in the fourth quarter to 76 billion euros, bringing its leverage ratio back down to 2.65 times adjusted EBITDA – back within management’s comfort zone of 2.25-2.75 times core earnings.
