Germany’'s telecommunications giant is exploring a full merger with the US arm in a move that will reshape the global telecommunications sector and potentially overshadow all merger and acquisition deals ever made.
Deutsche Telekom is considering a full merger with T-Mobile US, widely reported by German local media outlets and first published by Bloomberg, in an agreement that could create the world's most valuable wireless operator and redefine the future of the European technology champion.
German group already T-Mobile US’in %He holds little more than 53’, making him the dominant shareholder of the American carrier.
Now, according to people familiar with the matter, the establishment of a new holding company that will offer all-share offers for both firms is being investigated; The two publicly traded giants are brought together into a single transatlantic entity listed on both the US ’ and the European ’.
The combined group could be worth up to $400 billion (360 billion euros), surpassing the $202.7 billion Vodafone-Mannesmann merger announced in 1999’; This is currently the largest public merger and acquisition agreement in history, according to data from the London Stock Exchange Group.
This will make it not only a telecommunications story, but also a turning point in corporate history.
GermanyA jewel in the industrial crown of ’
Deutsche Telekom Germany is no ordinary company in ’.
This company, which split from the state-owned Deutsche Bundespost’ in the mid-1990s, remains one of the largest and most strategically important telecommunications groups in Europe. German government and state-owned credit institution KfW’nin total approx. %He has a stake of 28’, which makes Berlin’i not only a passive observer but also a major player in all kinds of deals.
Their approval is needed for any transaction and this is far from a guarantee.
A full merger, Berlin’in shares estimated %Until 17-18’e, and potentially roughly what German officials historically saw as the backdrop for strategic business. It will cause it to fall below the ’ threshold. This can turn into a political problem as well as a financial one.
The irony is that the T-Mobile US’ has become the locomotive that drives all the valuation of Deutsche Telekom’. The German company's market capitalization of approximately 135 billion Euro’ %More than 70’ can be attributed to the T-Mobile conglomerate.
In reality, Deutsche Telekom’'s listed shares in Frankfurt’ are increasingly becoming just a complement to the wireless communications business in ABD’. A complete merger formalizes this fact.
T-Mobile’'s comeback story
The German-owned journey of the T-Mobile’ has not been easy.
Deutsche Telekom made an agreement to acquire VoiceStream Wireless’ in 2000, initially with a transaction valued at $50.7 billion (46 billion euros), and after the deal was completed the following year, the company changed its name to T-Mobile USA.
Ten years later, the business was shedding the blood of its customers and reducing group earnings. Attempt to sell AT&T’ye has been blocked by regulators. Instead, Deutsche Telekom listed T-Mobile’ through a reverse merger with MetroPCS in 2013 and then rebuilt its shares over time.
T-Mobile has since grown to become the second largest wireless operator in ABD’, which has a larger market capitalization than Deutsche Telekom’ itself and accounts for the majority of the group's profits.
In short, it is the success story that saved the parent company.
A holding company with an Irish plan
According to a scenario that is currently at the level of speculation due to Deutsche Telekom’'s refusal to formally approve or provide details of the deal, a new holding company will offer all shares for both firms, which will belong to existing shareholders in both the U.S. and Europe’, and will be listed in both the U.S. and Europe’, reflecting the structure used in the 2018 merger of industrial gas companies Linde and Praxair’in, where an Irish holding company serves as an impartial vehicle for transatlantic merger.
The holding company will likely be established outside Germany and Ireland will be seen as a possible model. Whether or not Berlin’ will accept this is another question.
The next regulatory mountain
Obstacles are tough. The shareholders of Deutsche Telekom’ shall not be liable for any capital increase. %It will require the approval of 75’.
U.S. Congressman Jim Jordan, chairman of the House Justice Committee, said the U.S. government would review any agreement. Bloomberg’e “The acquisition of T-Mobile’ by a foreign company will attract the attention of our staff” said.
Antitrust applications, FCC approval and a possible national security review via CFIUS are on the horizon. Negotiations are at an early stage and no agreement can be reached.
But the fact that this is happening signals something important: After 25 years of buying, listing, almost selling and rebuilding, Deutsche Telekom may finally be ready to bring the T-Mobile’ home.
