According to a new report from Reuters, despite the surging success of T-Mobile US and its UnCarrier initiative, parent Deustche Telekom is still looking for a way out of the US market after 12 years of effort and the German telecommunications firm sees T-Mobile’s profits limited by its fourth place ranking in the U.S. market despite quarterly customer increases. While T-Mobile has added over 2 million new postpaid subscribers in the last half of 2013, Deutsche Telekom would rather use the proceeds from a potential sale to improve its existing German infrastructure and expand operations in Eastern Europe.
The conglomerate recently completed the purchase of a Czech carrier for $1.1 billion that it previously bought a majority stake in as a signal of its renewed intentions to establish a larger foothold in Eastern Europe over continuing to have a presence in the US which it sees as a liability, despite the US operations being the only profit center for the conglomerate over the past 11 years in spite of the millions spent on expansion and network/capital investment.
In fact, current DT CEO Tim Hoettges is worried the risk of regulators halting the deal is high enough to warrant a huge break-up fee to compensate Deutsche Telekom for the time it will be spending on the transaction, something that SoftBank’s Masayoshi Son has previously stated neither SoftBank nor Sprint would be able to afford.
With Sprint’s recent billion dollar loss on top of the majority of last quarter’s subscriber growth coming from MVNOs instead of postpaid, it puts their recent change of heart on the T-Mobile deal into perspective, as it’s forcing Sprint and SoftBank to rethink their entire operations strategy without factoring in the T-Mobile purchase, which may be a very bitter pill for Masayoshi Son to swallow, as he initially hoped to combine Sprint and T-Mobile to better compete against Verizon and T-Mobile.
