Suffering from the global recession, its relatively smaller size as the No. 4 wireless carrier in the United States, and a late launch into 3G and smartphones, T-Mobile USA has become a problem for Deutsche Telekom. This week DT’s top shareholders gave it until the middle of next year to save T-Mobile USA.
The Financial Times reported that shareholders are willing to “force” change on the money-losing U.S. business if CEO René Obermann fails to produce a turnaround.
The ongoing rumor that DT would acquire Sprint Nextel Corp. to merge it with T-Mobile got a boost from the news. However, any tie-up would undoubtedly be fraught with network integration and other issues. Marrying T-Mobile’s GSM network to Sprint’s CDMA would be problematic, for instance. And, Sprint is not exactly the healthiest itself, with a market cap of $12 billion and net debt of $16.4 billion, FT noted. However, a merger would create a new No. 2 domestic carrier, and could give both companies the economies of scale needed to compete and win against AT&T Inc. and Verizon Wireless.
Internally, the deal appears to be off the table, with DT shareholders reportedly preferring a strategy that would rely on a continued 3G build-out and smartphone push – the carrier was the first to launch devices based on the Google Android platform, for instance. There is also some question as to the effect of the recession and whether T-Mobile actually has a much deeper intrinsic issue than just a bad economy – such as simply being too small.