Deutsche Telekom AG is considering a full combination with its U.S. subsidiary T-Mobile US Inc., a deal that would create a multinational telecommunications group and become the largest public M&A operation in history, according to people with knowledge of the matter.
Read more The former CEO of Air Europa denies that Begoña Gómez intervened in the rescue
Deutsche Telekom is already T-Mobile’s largest shareholder, with a stake of nearly 53%. The German company has been analyzing the creation of a new holding company that would launch a stock offer for shares of both Deutsche Telekom and T-Mobile, said the people, who asked not to be identified because the information is private.
Also read
The potential transaction would result in a single, simplified corporate group that would control the operations of Deutsche Telekom and T-Mobile, and would be jointly owned by the current investors of both companies. The combined entity could subsequently seek to list publicly in the United States and on a major European stock exchange, although details are still being worked out, some of the people noted.
The talks are in a preliminary phase and any transaction would require political support to move forward, sources indicated. Details of the potential deal could also change. The companies have considered closer integration intermittently for years and there is no certainty that they will decide to move forward this time, they added.
“As is customary, DT and TMUS do not comment on speculation related to their corporate activity, nor are there specific details we can comment on regarding your inquiry,” a Deutsche Telekom spokesperson said in an emailed statement. A T-Mobile representative declined to comment.
Deutsche Telekom shares trade at a much lower earnings multiple than T-Mobile, which accounts for most of its profits. Combining the two companies could reduce that valuation discount and give the merged group greater size to potentially undertake acquisitions. It would also create the world’s largest wireless operator by market capitalization, surpassing China Mobile Ltd., valued at approximately US$235 billion.
T-Mobile shares have fallen about 22% in the last year, putting its market value at about US$217 billion. Deutsche Telekom has retreated 10% in Frankfurt trading during that period, to a market capitalization of €141 billion (US$166 billion).
Deal hurdles
Any transaction could face significant hurdles, including the need for political support in Berlin and Washington. The German government and state bank KfW jointly own nearly 28% of Deutsche Telekom, giving them considerable influence over any deal.
To gain approval, the companies might have to consider commitments to maintain a relevant base in Germany and make significant investments in the United States, some of the people said. It is unclear whether the German government would support the operation, as it would imply a smaller stake in the combined company. They would also have to convince investors that the benefits of creating a larger multinational group outweigh the advantages of maintaining two separate, more focused companies that appeal to investors interested in specific markets.
Read more Key SMS messages against Fernández Díaz vanish
The new holding company would likely be incorporated in a European jurisdiction outside Germany, the people noted. Companies have previously used a similar structure for transcontinental mega-mergers, including the approximately US$35 billion combination between U.S. company Praxair Inc. and Germany’s Linde AG.
To finalize that operation, an Ireland-based holding company — considered a neutral midpoint — was created, which launched separate stock offers for Praxair and Linde. The merged group then listed on the New York Stock Exchange and the Frankfurt Stock Exchange.
In a February podcast, Deutsche Telekom CEO Tim Hoettges warned that European regulation is a major obstacle hindering the development of the continent’s digital infrastructure. He noted that, although Deutsche Telekom has become a global heavyweight, its market value is driven almost exclusively by its U.S. business, reflecting the difficulties of the European market.
The potential move also comes at a time of increasing tensions between U.S. President Donald Trump and European leaders such as German Chancellor Friedrich Merz, who have clashed on issues ranging from tariffs to the NATO alliance.
The European Union is working on new merger guidelines that could facilitate the creation of large European companies capable of competing globally against rivals from the United States and China. At the same time, many European companies have been exploring acquisitions in the U.S. to take advantage of that market’s faster growth.
Deutsche Telekom has been laying the groundwork for years to exert even greater control over T-Mobile. Former Deutsche Telekom executive Srini Gopalan took over as T-Mobile CEO in November. Gopalan had been CEO of Deutsche Telekom Germany before joining T-Mobile as COO in March of last year.
The company has expressed its desire to increase its stake in T-Mobile, and Hoettges said earlier this year that the company was evaluating ways to further strengthen its position.
Read more Cuba acknowledges meeting with a United States delegation in Havana
