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German Parent May Sell T-Mobile

July 5, 2005
Deutsche Telekom AG may sell T-Mobile USA, its U.S. wireless operation, rathern than spend the billions necessary to upgrade its network to keep pace with competitors, the Wall Street Journal reported.

The Journal said T-Mobile could be worth as much as $30 billion in the rapidly consolidating U.S. market. A cable company seeking a quick entry into wireless would be an ideal buyer, the report said.

T-Mobile has enjoyed good growth in the U.S., adding more than 4 million new customers last year. But as the fourth largest carrier, T-Mobile will soon be left behind, as the Cingular-AT&T Wireless and Sprint-Nextel mergers change the American competitive picture.

Its latest growth spurt gives T-Mobile about 18 million customers, whereas Cingular now has more than 50 million and Sprint-Nextel will have more than 40 million.

Just last month, J.D. Power Associates ranked T-Mobile highest among the six largest wireless service providers in creating a positive experience among customers who contact their providers for service or assistance. It was the second year in a row the company was ranked first in customer care.

Although Deutsche Telekom has always said it wanted to keep T-Mobile, it is increasingly reluctant to commit to the huge expenditures that the hotly competitve U.S. market requires. The possibility of getting a premium price from Comcast or perhaps a consortium of cable companies may be too good to pass up, analysts said.

T-Mobile lags most notably in providing wireless. While Verizon Wireless and Sprint are rapidly deploying high-speed wireless services, T-Mobile relies mostly on Wi-Fi, which has a very limited range.

Adding to the pressure to sell is German's sour economy. Deutsche Telekom's biggest shareholder is the cash-strapped German government, which would be eager to collect its share of the proceeds from a sale.

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