TC2's David Rohde on Telecom

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Deutsche Telekom, stuck with the U.S., may make a U.K. retreat

By Posted February 17, 2012

The following is a guest post by TC2′s Mark Sheard, who is based in London.

Deutsche Telekom had important plans for the funds it was expecting to receive from the sale of T-Mobile USA to AT&T, and ripples from the implosion of that deal are now being felt on this side of the Atlantic.

Deutsche Telekom had planned to use the monies from the AT&T deal for debt reduction, share buy-back and other investments. But now it needs to change direction. And indeed on Thursday, Bloomberg stated that Deutsche Telekom is now considering ways to exit its U.K. joint venture with France Telecom, called “Everything Everywhere”.

It should be noted that the sources for this story were not identified, and predictably both Deutsche Telekom and France Telecom declined to comment. But they didn’t deny the story, and the potential for fractures in the joint venture is something we have seen from Day One. The T-Mobile UK (TMUK) and Orange integration has proved to be challenging and their separate cultures and characters are still evident.

One observation made in the Bloomberg article is that Deutsche Telekom’s need for cash to upgrade its U.S. network is a driver for its potential exit from the U.K. joint venture. As we noted last week, T-Mobile USA has yet to announce any LTE plans whatsoever. Now it may also need to examine other disposals to keep T-Mobile USA (which arguably it doesn’t really want) within touching distance of its U.S. competitors.

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