Communications Solutions Featured Article

Speculation About T-Mobile USA Spinoff, IPO Heats Up

By David Sims, TMCnet Contributing Editor

Recently, TMCnet reported on the speculation that Deutsche Telekom (News - Alert) was considering spinning off T-Mobile USA or giving it an IPO. Evidently that speculation is growing stronger.

 

According to The Wall Street Journal, 'the most likely scenario for Deutsche Telecom would be to sell about 20 percent of the division to investors and retain the rest.'

 

A partial spinoff remains an option, but according to TheStreet.com, 'a merger with a U.S. rival is also on the table though less likely, the Journal's sources added, since it would face regulatory and technological hurdles.'

 

Deutsche Telekom isn't putting out any official word one way or the other.

 

T-Mobile's market share in the U.S. is about 14 percent, TheStreet.com notes, 'below rivals AT&T, Verizon (News - Alert) Wireless and Sprint.'

 

Reuters wrote that Deutsche Telekom 'expects to make a decision in the coming months,' adding that 'an IPO could help fund T-Mobile (News - Alert) USA's network build-out.'

 

Sure could - it's not like Deutsche Telekom's giving up the shining star of the U.S. mobile galaxy either. T-Mobile USA is looking up at Verizon Wireless, AT&T and Sprint Nextel (News - Alert) in the standings, with no real reason to move into the top three anytime soon: As Reuters notes, it's been hemorrhaging customers 'to larger as well as smaller rivals.'

 

BusinessWeek adds that a spinoff 'would reward Deutsche Telekom investors, who have watched share prices decline 10 percent this year. The company spent almost $3 billion in the first three quarters of last year building out its U.S. high-speed third-generation wireless network to stem customer losses to larger rivals.'

 

Last year, some people thought they'd merge with Sprint, Leap Wireless (News - Alert) International or MetroPCS Communications, or maybe go for a network partnership with Clearwire. None of those panned out, though.

 

They're not exactly destitute: 'Based on estimated earnings before interest taxes depreciations and amortization of $6 billion, T-Mobile USA would have an equity value around $20 billion and could take on $12 billion in debt and maintain an investment-grade rating,' Reuters is quoting the Journal as saying.

David Sims is a contributing editor for TMCnet. To read more of David’s articles, please visit his columnist page. He also blogs for TMCnet here.

Edited by Amy Tierney