Deutsche Telekom Says T-Mobile Value Back to AT&T Deal Level

Deutsche Telekom AG has recouped its investment in T-Mobile US Inc., with an increase of the unit’s value compensating for a 7.4 billion-euro ($10 billion) writedown on the asset in 2012, according to the German company’s chief executive officer.

Timotheus Hoettges made the assessment in an interview with Bloomberg News as Deutsche Telekom once again explores a potential sale of its holding in the fourth-largest U.S. carrier. Since a failed disposal of the business to AT&T Inc. in 2011 for $39 billion, Deutsche Telekom has made T-Mobile the country’s fastest-growing wireless provider by merging it with MetroPCS Communications Inc., expanding its network and introducing cheaper and more flexible pricing plans.

“We already have increased the value to what it was at the sale,” Hoettges said in Munich yesterday, where he was attending the annual DLD conference for entrepreneurs and technology companies. “That means with 67 percent of a company that’s worth $42 billion, we’re already back at the value of the AT&T deal.”

SoftBank Corp., seeking to combine its Sprint Corp. unit with T-Mobile, has entered direct talks with Deutsche Telekom to resolve obstacles to a potential deal, people with knowledge of the matter said. T-Mobile has an equity value of $26 billion and total debt of about $13.6 billion, according to data compiled by Bloomberg.

Succeeding Obermann

Hoettges declined to comment on any discussions over a potential sale of T-Mobile. The 51-year-old, who succeeded Rene Obermann as Bonn-based Deutsche Telekom’s CEO this month, was personally involved in negotiating the transactions with AT&T and MetroPCS.

In 2012, shortly after the MetroPCS agreement, Deutsche Telekom wrote down the value of its T-Mobile holding, reflecting reduced earnings potential because of an exodus of customers at the time.

T-Mobile CEO John Legere this month announced the best quarter in eight years for the carrier, which added 869,000 monthly subscribers in the final three months of 2013. Since the MetroPCS transaction was completed in May, T-Mobile’s stock has doubled in U.S. trading.

Deutsche Telekom climbed 0.8 percent to 12.57 euros in Frankfurt trading today. The former German phone monopoly has a market value of 55.9 billion euros. T-Mobile closed at $32.51 in New York on Jan. 17. The U.S. equity markets are closed today for a holiday marking the birthday of civil rights leader Martin Luther King, Jr.

SoftBank Financing

“The U.S. is a great story for me,” Hoettges said. “Truly, when you think how things came together, then I’m fairly proud -- together with all those involved -- of what we created there.”

Deutsche Telekom wants an all-cash offer for T-Mobile, and SoftBank is trying to finance a deal to provide as much cash as possible, one of the people said. SoftBank founder and president Masayoshi Son is seeking to borrow about $20 billion from banks including Goldman Sachs Group Inc., Mizuho Bank Ltd. and Credit Suisse Group AG, people said last month. Sprint would take on any debt relating to the deal, one person said.

Merging Sprint and T-Mobile would create a strengthened rival to Verizon Wireless and AT&T, but a deal may face obstacles from regulators concerned about reducing the number of national operators.

Cash Use

Hoettges said Deutsche Telekom’s favored use of cash is for network spending, while a reduction of debt would be financed from operating cash flow. The German carrier, with phone networks across Europe, has earmarked spending of almost 30 billion euros in the three years through 2015.

Deutsche Telekom plans to apply for subsidies from the European Union’s regional fund for expanding broadband coverage in rural areas in Germany. EU Commissioner Neelie Kroes said last week the fund would for the first time focus on providing resources for network rollouts starting this year.

“We’ll apply for every project that gets tendered out there,” Hoettges said. Deutsche Telekom would use the funds for its almost 5,000 joint broadband projects with communities in Germany for which it isn’t economical to roll out high-speed connections, he said.

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