Deutsche Telekom signs contract regarding termination of Joint Venture in New York, California and Nevada - T-Mobile USA to purchase GSM network in California and Nevada for US$ 2.5 billion - Wholesale agreement with Cingular will secure revenues of at least USD 1.2 billion over maximum four years for T-Mobile USA - Long term customer base expected to increase from current market estimates of around 25 million to 30 to 35 million - Ricke: "Our market position to be strengthened in an important growth region of the USA."
Deutsche Telekom will further build on the success of T-Mobile USA and strengthen its presence in the U.S.A. T-Mobile USA and the U.S. mobile communications company Cingular Wireless have signed a contract setting out the arrangements for the dissolution of the two companies' mobile communications joint venture established in California, Nevada and New York City in 2001 and the acquisition of the GSM network in California/Nevada from Cingular. As a result, T-Mobile USA will become the sole owner of the GSM network in California and Nevada and will regain full ownership of the New York network.
Chairman of the Board of Management of Deutsche Telekom AG Kai-Uwe Ricke commented on the planned transaction: "We are confident that this investment will accelerate the long-term profitable growth of our U.S. mobile operations by strengthening our market position in the important and attractive markets of California and Nevada."
Over the past two years since the start of the joint venture in California, Nevada und New York, T-Mobile USA gained nearly 1.7 million customers in California and Nevada alone. The acquisition of the network in these two states strengthens the basis for the growth opportunities of T-Mobile USA. Actually the penetration of mobile customers in the US stands at 55 percent, significantly below the 80 percent level in Europe.
In Q1 2004 T-Mobile USA continued to gain market share in the U.S. Net adds were 1.2 million customers, coming in strong second among the "Big 6" operators in the U.S. This was accompanied by the strongest ARPU increase among the big six operators, a 43 percent increase in revenues to USD 2.6 billion and an increase in EBITDA of 46 percent to USD 507 million (all figures German GAAP).
Karl-Gerhard Eick, Deputy Chairman of Deutsche Telekom AG, responsible for Finance and Controlling, said: "The continued expansion of our customer base in both California/ Nevada area is an important engine for the continued growth of T-Mobile USA, and this agreement will help us to continue our success story. We do not expect the transaction to have any negative impact on Deutsche Telekom's credit profile."
René Obermann, Chairman of the T-Mobile International AG Board of Management elaborate on the significance of the presence of T-Mobile USA in California and Nevada for the T-Mobile group: "Within a short period we have built a customer base of nearly 1.7 million in these two key states. In addition, we anticipate that more than 20 percent of all T-Mobile USA's new customers will come from these markets. As a result of this agreement, T-Mobile will continue its dynamic development as one of the growth leaders of the U.S. mobile market."
The agreement between T-Mobile USA and Cingular was made possible as a result of Cingular's pending acquisition of AT&T Wireless in the USA, and the consequent combination of the two companies' network capacities. The transaction is subject to the approval of Cingular's acquisition of AT&T Wireless by U.S. anti-trust authorities, and the Federal Communications Commission (FCC) and other regulatory approvals.
The purchase price of USD 2.5 billion for the GSM network in California/Nevada will be off-set by a payment of USD 200 million related to the unwinding of the joint venture. As a result T-Mobile USA will make a net cash payment of approximately USD 2.3 billion to Cingular. Ownership of the network in New York will return to T-Mobile USA. Until now T-Mobile has handled its traffic in these markets through the network of the joint venture. Closing of the deal is expected in the beginning of 2005.
It has also been agreed that Cingular will purchase network capacity from T-Mobile USA worth at least US$ 1.2 billion over a maximum of four years. This wholesale agreement is to ensure the orderly migration of Cingular's customers in California, Nevada and New York over time to the network they will acquire from AT&T Wireless. The agreement provides the opportunity for Cingular to purchase additional capacity at similar terms.
T-Mobile USA will return 10 MHz of mobile spectrum in New York in exchange for mobile spectrum in selected markets in California as agreed in the original joint venture agreement. T-Mobile USA is entitled to use the spectrum currently available to the joint venture until such time Cingular customers have migrated from the networks.
In addition, T-Mobile USA will acquire from Cingular an additional 10MHz of spectrum in San Francisco, Sacramento and Las Vegas for USD 180 million.
T-Mobile USA will have the option to acquire a further 10 MHz of spectrum in the key Californian markets of Los Angeles and San Diego from Cingular within two years.
T-Mobile USA might buy additional spectrum in the U.S. as it continues to outperform expectations. This intention has already been announced by Deutsche Telekom and is included in its investment guidance.
As a result Deutsche Telekom is increasing its projection for the development of the customer base of T-Mobile USA at the end of 2004 to more than 16 million. The estimate for the long term customer base has been increased to between 30 and 35 million from current market estimates of around 25 million over a ten year horizon.
This press release contains forward-looking statements that reflect the current views of the Deutsche Telekom management with respect to future events. Forward-looking statements are based on current plans, estimates and projections, and therefore too much reliance should not be placed on them. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control, including those described in the sections "Forward-Looking Statements" and "Risk Factors" of the Form 20-F submitted to the U.S. Securities and Exchange Commission. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom's actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom does not assume any obligation to update forward-looking statements to take new information or future events into account.