Deutsche Telekom CEO Claims Driver's Seat on T-Mobile US M&A

(Bloomberg) -- Deutsche Telekom AG Chief Executive Officer Tim Hoettges on Wednesday sent a clear message to executives seeking deals with its prized T-Mobile US Inc. unit: The decision over what happens will be made in Germany.

Deutsche Telekom is in a "position of strength" in the U.S. after the unit led by CEO John Legere won 8 million customers in 2016 and most of the spectrum in this year’s wireless auction, Hoettges said Wednesday at the German carrier’s shareholder meeting in Cologne.

“We are continuing to develop our business. We have many different options to do this,” Hoettges told investors. “We decide what, when, and how.”

The comments are the clearest assertion yet that Deutsche Telekom is no seller and prefers to use T-Mobile US as a launchpad to grow its U.S. presence in any deal negotiations. T-Mobile US has become the key growth driver for the Bonn-based carrier, and Hoettges recently called it his “kingmaker asset.”

Deutsche Telekom rose as much as 1.1 percent Thursday in Frankfurt, and was up 0.3 percent to 17.84 euros in afternoon trading. T-Mobile US declined 0.3 percent to $66.9 a share, as of 11:16 p.m. in New York. Shares of the U.S. carrier, about 64 percent owned by Deutsche Telekom, have more than doubled since the start of 2015, giving it a market value of about $55.6 billion.

T-Mobile executives have talked up possibilities of merging with Sprint Corp., which is controlled by Japan’s SoftbankGroup Corp., to create a stronger competitor to Verizon Communications Inc. and AT&T Inc. Analysts have also pointed to potential coalitions with cable companies or even larger technology players such as Amazon.com Inc. that may want to control distribution as the internet becomes more mobile.

In the U.K., things are going less smoothly with Deutsche Telekom’s 12 percent stake in BT Group Plc losing 2.2 billion euros ($2.5 billion) in value last year. Shares of the British carrier have declined 31 percent in the past year after it got entangled in an accounting scandal in Italy, leading to a writedown and contributing to a reduced profit outlook. The company is also struggling with a pension shortfall and deteriorating IT-services business.

Hoettges said BT was hurt by the U.K.’s decision to leave the European Union and a resulting drop in the pound. He reiterated Deutsche Telekom’s commitment to the carrier, saying the financial stake "is the right strategic step" because of the British company’s leading position when it comes to wireless, business customers and TV.

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Kim Robert McLaughlin