Deutsche Telekom Shelves Merger Plans with US Subsidiary

Merger plans put on hold

According to Bloomberg, Deutsche Telekom has decided against a formal takeover offer for T-Mobile US, at least for now. Bloomberg cites people familiar with the matter. Strong opposition inside the company played a part. The works council, which represents employees, opposed the plan, and so did the investment fund Elliott Management, which recently bought a stake in Telekom. Telekom declined to comment and called the reports market speculation.

Key facts

• Telekom owns a little more than half of T-Mobile US.
• A merger would create the largest telecom company in the world.
• T-Mobile US grew sales by 7% in the third quarter, to $23.6 billion.
• Profit rose 27% to $3.5 billion. T-Mobile added 274,000 customer contracts, well above expectations.
• T-Mobile's share price is down 27% since the start of the year, at almost $150.

Why the idea came up

Bloomberg and the Handelsblatt reported in April that Telekom's leaders were looking at several scenarios for combining with T-Mobile US. Half of the seats on Telekom's supervisory board go to employee representatives. Their support or opposition therefore matters a lot. The union ver.di also has a board member who is deputy chair of the supervisory board, but it did not comment.

Why it matters

A merger would join two giant phone companies and reshape the global telecom market. The fact that employees and an investor both pushed back shows that such a deal is hard to get through. T-Mobile US is doing well, but investors are worried about new mobile plans from SpaceX and slower growth ahead.

What to watch

• Telekom may try a takeover offer later, according to Bloomberg.
• Telekom will publish its third-quarter results on November 5.
• Watch for any official statement on T-Mobile US or the merger.