By Friedrich Geiger
FRANKFURT-- Deutsche Telekom AG Chief Executive Timotheus
Höttges said Thursday he hasn't received an offer for U.S.
subsidiary T-Mobile US Inc. that meet his requirements for a deal
after Iliad S.A. of France bid $15 billion for a majority stake in
the U.S. cellular carrier.
Mr. Höttges said he is open to a transaction in the U.S. if it
is value-accretive, but "at this point in time, we have no offer on
the table which increases value more than what we're developing
organically." The offer from the upstart French operator, founded
by billionaire Xavier Niel, surprised him, he added. Deutsche
Telekom has a 67% stake in the U.S. firm.
T-Mobile US, which faces stiff competition from larger carriers
in the U.S., had also been in talks about a possible tie-up with
Sprint Corp., until Sprint decided this week not to pursue a
merger. Dish Network Corp. Chairman Charlie Ergen has also
expressed interest in acquiring T-Mobile US.
Mr. Höttges comments, which came as the German telecom operator
reported a rise in second-quarter profit, indicate that Iliad would
have to improve the terms of its offer to meet his conditions for a
deal. Iliad's management hasn't ruled out the possibility of
raising the bid. T-Mobile has also called Iliad's $15 billion
opening offer inadequate, people familiar with the matter have
said.
Iliad entered the French mobile market with cutthroat prices in
2012 and has since grabbed about 12% of the market. Mr. Niel says
he sees the same opportunity across the Atlantic, a market five
times the size of France's.
Deutsche Telekom net profit jumped a 34% in the second quarter
to EUR711 million ($951.5 million), compared with EUR530 million in
the same period a year earlier. Revenue slipped 0.3% to EUR15.11
billion. Earnings were boosted by T-Mobile US which became
profitable in the second quarter after posting a loss a year
earlier. A spectrum swap with Verizon Communications Inc. in the
U.S. contributed one-time income of around EUR400 million before
tax to Deutsche Telekom's earnings.
Mr. Höttges said he sees no urgency for a deal involving the
U.S. unit. "T-Mobile US is developing very well...and has won a
strong position in the U.S. mobile communications market," he
said.
However, the smallest of the U.S.'s four major carriers faces
big outlays of cash at looming spectrum auctions, which are
expected to cost carriers billions of dollars, if it is to remain
competitive. The two market leaders, AT&T Inc. and Verizon
Communications Inc., have superior financial muscle, said Mr.
Höttges in view of T-Mobile's position.
"I demand that, in order to ensure the long-term competitiveness
of the smaller competitors, we get concessions at the low band
auction..., so that we don't have to compete with the big
treasuries of AT&T and Verizon," he said.
Proceeds from a sale of the U.S. unit would help Deutsche
Telekom fund billions of euros in expenses to upgrade its domestic
network and fend off competition from Vodafone Group PLC and
Liberty Global PLC, which operate television cable networks in
Germany.
Deutsche Telekom boosted its domestic investment spending by
around 60% to more than EUR1 billion in the second quarter.
Network upgrading helped the group slow customer losses at its
German fixed-network business to its lowest level in at least 10
years, said the management. The domestic mobile business was
largely stable in the second quarter. In the rest of Europe,
revenue declined but cost-cuts mitigated the impact on earnings.
Business with corporate customers was hindered by a
restructuring.
For the full year, the company confirmed its forecast and
continues to predict adjusted earnings before interest, tax,
depreciation and amortization of around EUR17.6 billion.
Write to Friedrich Geiger at friedrich.geiger@wsj.com
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