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T-Mobile IPO?

February 5, 2010

Deutsche Telekom's shares rose on Friday following speculation that the company may float its underperforming T-Mobile USA unit.

A red traffic light stands next to the headquarters of the Deutsche Telekom
Telekom is looking to put a stop to losses at its US armImage: AP

Rumors have long been circulating about the future of T-Mobile USA; now, they've been given new life with a report in the Wall Street Journal that owner Deutsche Telekom may float or spin-off the unit. The paper said that the most likely scenario would be an IPO that would sell about 20 percent of the company.

The report saw shares in Deutsche Telekom rise by 1.6 percent in morning trading in Frankfurt on Friday.

T-Mobile USA's customers complained about network gapsImage: picture-alliance / chromorange

T-Mobile USA is the fourth-largest American carrier in the US mobile market, but the division has been losing money and customers, many of whom complained about insufficient network coverage. T-Mobile's losses have been gains for its bigger competitors, Verizon Wireless and AT&T.

Verizon Wireless recently sparked a price war in the US when it drastically cut its tariffs, and AT&T has profited from its exclusive contract to provide service for Apple's iPhone.

Telekom in talks with banks

"Although we believe that options such as an IPO of T-Mobile USA or a straight sale of the business would lead to a better price reaction, we still believe that the search for a partner is a much more likely scenario," LBBW analyst Stefan Borscheid wrote in a note. He kept a "buy" rating on the stock.

Experts in the American blogosphere say it's not very likely that Telekom would look to sell the unit to an American rival. T-Mobile is a GSM carrier, and the main contenders for a merger do not use the same technology.

According to the Wall Street Journal, Deutsche Telekom has held discussions with several banks about underwriting an IPO for the unit, including Deutsche Bank. However, Deutsche Telekom declined to comment for the article, and T-Mobile USA representatives said they can't comment on rumors.

dc/dpa/Reuters
Editor: Sam Edmonds

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