Deutsche Telekom is reinforcing its business in the United States: T-Mobile US and Sprint Corp. will merge in an all-stock transaction.
The two American companies, as well as their respective majority shareholders Deutsche Telekom (62% of T-Mobile US) and Softbank (83% of Sprint) have signed an agreement to this effect, according to Deutsche Telekom. The enterprise value of the new company amounts to around $150 billion (€124 billion).
“This is an exceptional deal, which will strengthen Deutsche Telekom’s presence in the leading markets in the Western World,” said Timotheus Höttges, CEO of Deutsche Telekom. “No other company in the industry is represented as strongly in both the USA and Europe as we are. 90% of our revenue comes from countries with particularly strong economic conditions. Deutsche Telekom benefits from growth on both sides of the Atlantic.”
The new, larger T-Mobile US will have around 127 million branded customers and revenues of around $76 billion (€63 billion), based on expected figures for 2018, positioning the company on a level with its two national rivals AT&T and Verizon in future.
The larger T-Mobile US, with its greater financial and spectrum resources, will be able to roll out 5G technology more quickly and better than either T-Mobile US or Sprint would have been able to do alone, according to Deutsche Telekom. To do this, the intention is to focus on convergence products combining fixed and mobile communication offerings, resembling Deutsche Telekom’s strategy in Europe.
According to the agreement, T-Mobile US will take over all Sprint shares in a stock swap. For every 9.75 Sprint shares, the company’s shareholders will receive one new share in T-Mobile US. On completion of the transaction, Deutsche Telekom will hold around 42% of the T-Mobile US shares. Softbank will have a 27% stake. The remaining approximately 31% of shares will be in free float.
In addition to this, Softbank and Deutsche Telekom will sign a voting rights agreement. This will provide Deutsche Telekom with extensive majority rights in determining the voting decisions of the T-Mobile US shares held by Softbank, giving Deutsche Telekom direct and indirect access to voting rights for a total of 69% of T-Mobile US shares.
The merged company will be headed by John Legere, currently CEO of T-Mobile US, who will also be a member of the board of directors. Timotheus Höttges is to be appointed chairman of the board. In American companies, this post is similar to that of chairman of the supervisory board in German companies.
This division of the shares in T-Mobile US and the regulation regarding company management mean that Deutsche Telekom will be able to fully consolidate T-Mobile US in future.
Depending on regulatory and anti-trust approval by authorities including the US Department of Justice and the FCC, Deutsche Telekom expects the transaction to become effective at the end of 2018. The closing is anticipated to take place in the first half of 2019.
