Deutsche Telekom to Buy Sprint?

 
 
By Reuters -  |  Posted 2008-05-05 Email Print this article Print
 
 
 
 
 
 
 

A deal would create the largest mobile network in the United States, but analysts doubt its merits.

 

By Nikola Rotscheroth

FRANKFURT (Reuters)-Shares in Deutsche Telekom retreated, and Sprint Nextel's stock advanced on Monday amid media reports that Germany's largest phone company is looking at a possible purchase of the U.S.-wireless group.

Deutsche Telekom's shares fell 1.2 percent to 11.64 euros by 1126 GMT, the leading decliner among German blue chips, while Sprint shares were indicated more than 10 percent higher at $8.70 in pre-market trading.

Such a deal would vault Deutsche Telekom's T-Mobile USA unit past AT&T and Verizon Wireless to the No. 1 spot among U.S.-mobile phone service providers-but analysts were skeptical Telekom would pull it off.

"I cannot imagine that Telekom would decide to make this step at this stage," said Heinrich Ey, a fund manager at Allianz Global Investors.

Sprint Nextel's depressed share price may make a takeover seem attractive, but the deal would require massive investments to integrate different network technologies, he said.

Sprint has been running two networks which are different from T-Mobile's GSM infrastructure, and its new UMTS systems are expected to launch by mid-year.

Analysts at Merck Finck doubted that the U.S. authorities would allow a foreign company to become market leader in such a sensitive sector.

Buying Sprint would also tie up management at a time when Deutsche Telekom is close to acquiring the Greek government's stake in OTE, Ey added.

"Telekom wants to become less dependent on the Germany business. OTE is a correct step in this regard, but Telekom would be doing itself no favors with Sprint," he said.

Deutsche Telekom declined to comment on the reports, which cited people familiar with the situation as saying it was studying different options such as a takeover or a merger-but that no final decision had been made.

In March, a research report by Merrill Lynch fuelled speculation that Deutsche Telekom might consider a takeover of the third-biggest U.S.- wireless carrier. Deutsche Telekom's T-Mobile USA is the fourth-biggest U.S.-operator.

Merrill pegged the German company as a potential buyer of Sprint, because it would allow it to triple its subscribers and make T-Mobile USA the market leader.

In the note, Merrill Lynch said Sprint's operational problems would cause it to cut prices in an effort to keep and attract customers; potentially starting a price war among U.S. operators, but an acquisition would avert such a development.

It also said a deal would be attractive considering the low value of Sprint's stock, as well as the high value of the euro.

Whether the German government, which still owns around a third of the former state-owned company, would agree to Deutsche Telekom essentially becoming a U.S. company is an open question, analysts have said.

Deutsche Telekom in September acquired SunCom Wireless for $1.6 billion in cash and bought U.S.-wireless company VoiceStream in 2000 for $35 billion. (Additional reporting by Nicola Leske in Frankfurt and Tiffany Wu in New York; Editing by Quentin Bryar)

??« Thomson Reuters 2008 All rights reserved
 

 
 
 
 
 
 
 
 
 
 
 

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