Monday, March 21, 2011

DT could buy E-Plus for ... EUR 10 billion

Much of the logic of selling T-Mobile USA to AT&T, from Deutsche Telekom's perspective, is network roadmap: how to get to LTE, as a relatively small player? By selling, DT will be able to reduce debt (EUR 13bn), buy back more shares (EUR 5bn) and have a EUR 10bn left, albeit locked up in AT&T shares.

There must be parallels in many countries. Take [Germany].

T-Mobile USA [E-Plus] is having difficulties in financing the inevitable LTE upgrade. Hence, a long period of merger speculation around Sprint [O2]. Now however, T-Mobile USA [E-Plus] is sold to the the market leader, AT&T [Deutsche Telekom], for 7.1x 2010 EBITDA.

(OK, the comparison fails in two areas: there has never been a conflict of technology between E-Plus and O2, the way it exists between T-Mobile USA and Sprint. And Deutsche Telekom doesn't need E-Plus to get to nationwide coverage.)

So how much would E-Plus cost? At 7.1x 2010 EBITDA, the price would be close to ... EUR 10bn! (EUR 9.8bn, to be more precise, leaving EUR 200m for those poor starving bankers).

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