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U.S. merger within reach, D.Telekom CEO goes on offensive
BONN, Germany (Reuters) - The merger between T-Mobile US (TMUS.O) and Sprint (S.N) is within reach, the head of T-Mobile’s main owner Deutsche Telekom (DTEGn.DE) said on Wednesday, vowing to go on the offensive to close a valuation gap with U.S. market leaders AT&T and Verizon.
Highlighting the positive market reaction after a New York judge last week dismissed a lawsuit brought by more than a dozen U.S. states trying to block the deal, Tim Hoettges said the ‘new’ T-Mobile would have a market value of around $120 billion.
That compares with $274 billion for AT&T (T.N) and $242 billion for Verizon (VZ.N), he added in remarks prepared for a news conference.
“That is a difference of around $120 billion. I see no reason why this cannot be reduced considerably,” said Hoettges, talking up what he called “the biggest merger with a German company the U.S. has ever seen”.
Hoettges, 57, has battled for seven years to get the U.S. deal over the line. Once completed, the German group would own 42% of the ‘new’ T-Mobile but have a voting stake of 67% and control of the board.
The three main U.S. wireless carriers would have similar customer numbers of between 140 million and 150 million, Hoettges added: “That puts us on an equal footing and in a position to ramp up attacks on the competition.”
“We have the chance to become No.1 in the United States, to overtake AT&T and Verizon. That, at least, is our ambition,” he told a news conference.
Deutsche Telekom earlier forecast growth in its core earnings would slow to 3% this year after a strong fourth quarter, as it looks finally to complete a merger that would create the third-largest U.S. wireless carrier.
Europe’s largest mobile operator said it expected adjusted earnings before interest, taxation, depreciation and amortization after leases (EBITDA AL) to reach 25.5 billion euros ($27.5 billion) this year.
That is below analysts’ consensus forecast and marks a halving from the growth rate in 2019, when Deutsche Telekom’s U.S., European and German businesses all did well - helped by favorable foreign exchange rates.
With Sprint struggling during the protracted period during which the deal was pending, T-Mobile CEO John Legere has signaled he would seek to renegotiate some of its terms to reflect the changing market dynamics.
Uncertainty over the deal has weighed on the group balance sheet, as have the heavy costs of building next-generation 5G networks, forcing Deutsche Telekom in November to say it would cut its 2019 dividend.
Deutsche Telekom reduced its net debt by 2.8 billion euros in the fourth quarter to 76 billion euros, bringing its leverage ratio back down to 2.65 times adjusted EBITDA, within management’s comfort zone.
Fourth-quarter revenues rose by 5.4% to 21.361 billion euros, ahead of analyst expectations, while adjusted EBITDA AL was up 8.2% to 6.030 billion, also just ahead of consensus.
Deutsche Telekom shares were up 2.9% to 16.35 euros at 0905 GMT.
Reporting by Douglas Busvine; Editing by Michelle Martin and Mark Potter
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