Deutsche Telekom Wants to Merge with T-Mobile US

Deutsche Telekom (OTC: DTEGY), The giant German telecom company,  is proposing a full merger with US based  T-Mobile US (NASDAQ: TMUS). The idea reflects the company’s strategic ambition to turn its fast-growing American subsidiary into the core of a new transatlantic telecom giant. Turning the tables so to speak,  Deutsche Telekom already owns just over 53 percent of T-Mobile, but recent reports say it now wants the rest, a move that could create one of the largest telecom mergers ever.

The U.S. business provides the majority of Deutsche Telekom’s market value and earnings at this time. A full merger would give the German parent company complete control over its most successful offspring  while preserving T-Mobile’s spirit and strong PE valuation. The combined entity’s valuation could reach $300-400 billion, potentially becoming the world’s most valuable telecom operator with more than 200 million subscribers.

Deutsche Telekom’s idea is a new holding company structure that would fold both companies into a single, jointly listed transatlantic corporation. This structure would allow an all share transaction without requiring massive cash financing. Tim Höttges, DT’s CEO  is personally driving the effort, aiming to complete the merger before his retirement in 2028.  But the company acknowledges that there are concerns on both sides of the Atlantic as the largest telecom merger ever will require navigating politics, regulators, and shareholder issues.

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