Deutsche Telekom Shares Drop Along With U.S Deal

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In early trading Monday, Deutsche Telekom shares fell after the merger failure of its T-Mobile US unit with Sprint Corp. The loss of collaboration prompted several broker downgrades and brought Telekom’s stock about 3.6 percent lower.

Deutsche Telekom CEO, Tim Hoettges, stated that T-Mobile would continue with plans that has brought in over a million customers for 18 quarters consequentially.

“Frankly, T-Mobile US is well enough positioned to succeed on its own without Sprint,” said Dhananjay Mirchandani, a research analyst, adding, “As for Deutsche Telekom, after the shares take a near term knock, I don’t see how this really alters strategy”.

The drop in Telekom shares mirrored Tokyo’s market drop for Sprint, whose majority owner Softbank Group. On Sunday, SoftBank said it would raise its stake to under 85 percent to demonstrate its commitment the company which has $38 billion in debt.

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Analysts believe that Deutsche Telekom management deserves credit for not doing the deal for Sprint’s benefit, although the share-price target was lowered from 15.80 to 14 euros and the stock possesses a ‘hold’ rating.


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Investors question if the best years are behind T-Mobile, whose shares have peaked in June at $68. “I’d just love them to sell it,” said Ben Lofthouse, a fund manager, when he realized the T-Mobile-Sprint deal might be off the table. “There’s a tendency to run things for ever, sometimes, and then you end up selling at the wrong times,” added Lofthouse.

With T-Mobile’s latest share price, Deutsche Telekom’s 64 percent stake would be valued at roughly $31 billion.

If the companies had joined forces, T-Mobile and Sprint would have combined nearly 130 million customers, putting the merger as the third wireless carrier in the United States behind main companies AT&T and Verizon.

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