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Andreas Leigers

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New T-Mobile US with combined resources to launch on April 1, 2020

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  • Merger of T-Mobile US and Sprint by way of a stock swap deal with no cash components
  • Market capitalization of approximately 110 billion U.S. dollars*
  • New company with 140 million mobile customers 
  • Deutsche Telekom strong on both sides of the Atlantic
  • Continuation of the Un-carrier strategy and intensified 5G network build-out
us-merger

Today, the two U.S. telecommunications companies T-Mobile US Inc. and Sprint Corp. are merging to create the all-new, larger T-Mobile US.


The new T-Mobile US is to launch on April 1, 2020. Effective today, the two U.S. telecommunications companies T-Mobile US Inc. and Sprint Corp. are merging to create the all-new, larger T-Mobile US. The new company will continue to be included in Deutsche Telekom's consolidated financial statements as a fully consolidated subsidiary. For almost two years, the transaction has been working its way through various approval processes involving numerous national and regional courts and authorities in the U.S.

After the closing date, the new T-Mobile US will continue to intensify its incredibly successful Un-carrier strategy with more customers, greater financial resources, and the largest mobile spectrum portfolio of all competitors on the U.S. market.

This is a historical day amidst challenging times for Deutsche Telekom,” said CEO of Deutsche Telekom, Tim Höttges. “The merger puts us in a strong position on this important key market. It’s great that we, as a European company, were able to do this. Deutsche Telekom is strong on both sides of the Atlantic. We’re demonstrating that now. We will continue to invest heavily in all of our markets so we can keep growing.

Many people have worked towards this merger over the past seven years. I would like to thank you all. The new T-Mobile US can work faster to build the United States’ best 5G network. It has more resources to pursue the Un-carrier direction for customers. It can continue the growth course of the past seven years and create jobs. In doing so, the new T-Mobile US can harness potential for value creation for all shareholders. The future starts now.”

The new T-Mobile pushes new frontiers

The business combination will create an all-new, larger company with a market capitalization of around 110 billion U.S. dollars based on the T-Mobile US and Sprint share prices on March 31, 2020.

In its annual press conference on February 19, 2020, Deutsche Telekom presented some key data of the new T-Mobile taking the combined figures of both predecessor companies as of year-end 2019.

  • Around 140 million customers*, of which more than 100 million branded customers.
  • Revenue of approximately 77 billion U.S. dollars*.
  • Aggregate spectrum portfolio of approximately 300 MHz* nationwide across all bandwidths, giving it almost double the spectrum held by the two major mobile competitors AT&T and Verizon. This portfolio provides a much stronger basis for T-Mobile US to significantly expand nationwide coverage and to extend mobile network capacities, which translates into clear potential for sustained customer growth.

(*Data based on the 12 months of the 2019 calendar year as stated in the annual press conference on February 19, 2020)

Grafik_US-merger-EN

The figures shown here serve as an indicator of the sheer scale of the new company at year-end 2019. The future structure of the new T-Mobile US must factor in the agreement reached with the U.S. Department of Justice, one condition of which is that Sprint divests its prepaid business to DISH Network Corp. for around 1.4 billion U.S. dollars. The agreement also includes the sale of Sprint's 800 MHz spectrum licenses to Dish for some 3.6 billion U.S. dollars.

The planning for the merged entity remains based on expected cost and capital expenditure synergies with a net present value of 43 billion U.S. dollars. The cost savings generated by these synergies are predicted to exceed the integration costs starting three years after the transaction takes effect.

The merger is the culmination of a successful strategy for Deutsche Telekom's U.S. operations that has been rigorously implemented over the past eight years. Deutsche Telekom turned around a company that had been suffering declining profits for several years into the United States' fastest-growing, most profitable mobile communications provider. The following steps played a decisive role in this transformation:

2013

  • Development of the Un-carrier strategy with an unprecedented customer focus accompanied by a break from traditional customer relationships in the telecommunications industry.
  • Efforts began in parallel to drive forward the network build-out supported by the mobile spectrum obtained from AT&T after the termination of the sale of T-Mobile US in 2011.
  • Mobile communications provider MetroPCS was taken over on May 1, 2013, contributing around 9 million customers. MetroPCS was the strongest alternative provider in the U.S. prepaid segment at that time with a well-established brand. T-Mobile US used this as the basis to significantly expand its prepaid business and establish a much stronger sales presence. Following the business combination with MetroPCS, T-Mobile US was initially listed on the New York Stock Exchange, moving subsequently to the technology stock exchange Nasdaq. This step was a springboard to significantly greater scope for action on the financing side and established transparency regarding the development of shareholder value going forward.

2013 to 2019

  • This period was dominated by the push to build out the 4G LTE network, which reached 327 million Americans at the most recent count. Since the start of 2013, T-Mobile US, supported by Deutsche Telekom, has invested some 34 billion U.S. dollars, primarily in building out the network, and purchased mobile spectrum licenses for around 17 billion U.S. dollars (data based on IFRS accounting). Following the business combination with MetroPCS, T-Mobile US’ customer base grew from around 34 million to 86 million at year-end 2019. Since the IPO on May 1, 2013, the enterprise value has grown more than sixfold, from around 11 billion to around 72 billion U.S. Dollars on March 31, 2020.

2018 to 2020

  • Alongside posting strong growth in its operational business, T-Mobile US has been intensively working with Sprint to drive forward the business combination of both companies. With the support of the two majority shareholders, Deutsche Telekom (T-Mobile US) and SoftBank Corp. (Sprint), the focus going forward will be on propelling the Un-carrier strategy to new heights. At the end of 2019, T-Mobile US became the first company to activate a nationwide 5G network based on 600 MHz spectrum, bringing 5G to over 200 million U.S. Americans by the year-end.
  • Following the close of the merger, there are plans to keep forging this path with a larger customer base, greater financial clout, and the best mobile spectrum portfolio of all U.S. mobile providers. To achieve this, the new T-Mobile US will invest heavily in its network and its employees. Up to 40 billion U.S. dollars (U.S. GAAP) have been earmarked for this in the three years after the transaction takes effect. T-Mobile US thus intends to continue efforts to, among other things, construct and expand the country's first nationwide 5G mobile network and move into new business areas.
  • This unique combination of an intensified Un-carrier strategy, greater financial strength, and the best spectrum assets of all competitors opens up a major opportunity for the new T-Mobile US to develop into the United States' mobile communications market leader.

Capital-preserving transaction structure

The agreement to combine the businesses of both companies was signed on April 29, 2018. The transaction structure takes the form of a cash-preserving exchange of shares. The merger agreement was adjusted in early 2020 to reflect the different developments at T-Mobile US and Sprint over the preceding period. The original agreement was revised on February 21, 2020 to give an effective exchange ratio of around 11.0 Sprint shares for every one share in the new T-Mobile US for T-Mobile US shareholders including Deutsche Telekom.

The decision to apply a capital-preserving transaction structure based on a stock swap eliminates the need for any capital to flow from Deutsche Telekom to T-Mobile US. Neither will the transaction affect the Group's existing plans to continue investing heavily outside of the United States.

The merged entity's financing structure will be refocused with the combination of the businesses of T-Mobile US and Sprint. Firstly, T-Mobile US will repay a total of 14 billion U.S. dollars of intragroup financing to Deutsche Telekom, 8 billion dollars of which will be paid immediately upon the business combination taking effect.

Secondly, the formal change in the ownership structure gives Sprint Corp. bondholders the right to prematurely terminate some of the Sprint bonds.

A secured bridge loan facility has been made available to New T-Mobile by a banking syndicate for up to two years for initial financing.

Full consolidation in the Deutsche Telekom Group

Upon exchanging shares and the transfer of shares by SoftBank, Deutsche Telekom will hold a stake of around 43 percent in the new T-Mobile. SoftBank's share in the merged entity will be around 24 percent. The remaining 33 percent of shares in the new T-Mobile US are held by outside shareholders.

Deutsche Telekom has concluded a voting rights agreement with SoftBank, under which the former can also exercise for its own benefit the voting rights attached to shares held by the latter. Deutsche Telekom can thus exercise voting rights for around 67 percent of the shares in the new T-Mobile US.

Following the business combination, Deutsche Telekom will be able to appoint 9 of the 14 members of the Board of Directors of T-Mobile US, of whom a minimum of two must be independent representatives. Timotheus Höttges, CEO of Deutsche Telekom, will also be Chairman of the Board of T-Mobile US in the future.

These agreements concerning the voting rights and the appointment of members of the Board of Management enable Deutsche Telekom to keep control of the new T-Mobile US in the future and to include the company in its consolidated financial statements as a fully consolidated subsidiary.

Minimum dividend of 60 cents per share confirmed

Deutsche Telekom announced ahead of the merger that it planned to orient future dividends to the development in adjusted earnings per share after minority interests. The lower price cap of 60 euro cents per share for Deutsche Telekom dividends will still apply after the merger of T-Mobile US and Sprint. The intention is to hold the shareholders’ meeting, which is required in order to pay the planned dividend for the 2019 financial year, as soon as possible using the extended legal options for holding an online shareholders’ meeting.

Consolidated financial figures for the new T-Mobile US will be available for the first time from the second quarter of the 2020 financial year. Deutsche Telekom also plans to include the former Sprint Corp. in its consolidated Group figures for the first time from the second quarter of 2020.

This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. They are generally identified by the words “expect,” “anticipate,” “believe,” “intend,” “estimate,” “aim,” “goal,” “plan,” “will,” “seek,” “outlook,” or similar expressions and include generally any information that relates to expectations or targets for revenue, adjusted EBITDA, or other performance measures. Forward-looking statements are based on current plans, estimates, and projections, and should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. They include, for instance, the progress of Deutsche Telekom's staff-related restructuring measures and the impact of other significant strategic or business initiatives, including acquisitions, dispositions, and business combinations. In addition, movements in exchange rates and interest rates, regulatory rulings, stronger than expected competition, technological change, litigation and regulatory developments, among other factors, may have a material adverse effect on costs and revenue development. 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 can offer no assurance that its expectations or targets will be achieved. Without prejudice to existing obligations under capital market law, Deutsche Telekom does not assume any obligation to update forward-looking statements to account for new information or future events or anything else. In addition to figures prepared in accordance with IFRS, Deutsche Telekom presents alternative performance measures, e.g., EBITDA, EBITDA AL, EBITDA margin, adjusted EBITDA, adjusted EBITDA AL, adjusted EBITDA margin, adjusted EBIT, adjusted EBIT margin, adjusted net profit/loss, free cash flow, free cash flow AL, gross debt, and net debt. These measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Alternative performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.

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