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| Why is Deutsche Telekom Selling US Assets T-Mobile USA? |
ADR shares of German-based Deutsche Telekom PINK: DTEGY soared more than 12% as the parent company shareholders seemed to like the sale of the firm's T-Mobile USA unit to AT&T in a $39-billion deal. In contrast AT&T's stock NYSE: T was only up 1% on the news. AT&T's acquisition is looking more like a hostile takeover the way these stocks traded today and the way that cell phone tower stocks tanked on the news. It isn't widely known that Deutsche Telekom has been losing money on the transaction and has lost 59% of its value since closing the transaction years ago. The company has reported profit declines in 4 of the last 5 years.
Why does Deutsche Telecom want out of the US? The map above shows a very large company that has assets telecom assets all over the world. Is this about creating value for shareholders or a currency war? It makes me suspicious since the Dollar / Euro trades near an all-time low? Do German shareholders fear a sudden rise in the dollar or drop in the Euro and thus making a market timing decision on the sale? They could theoretically lose 40% of the T-Mobile USA value if the Euro / Dollar went back to par value and they didn't sell the company. Do the German's fear another US recession is on the way and are not willing to wait for other rumored mergers like Sprint and Orange UK. The deal sounds like a no-brainer to me if you are on the management team of Deutsche Telecom because even if the deal is not approved you still win with a $3B breakup fee and some of AT&T's LTE spectrum.
