Deutsche Telekom Gets US Relief As Rivals Cut Subsidies

T-Mobile USA has suffered a continuing exodus of subscribers in the past year as it slashed handset subsidies to boost profitability. Now, moves by Verizon Wireless and AT&T to do the same are giving the Deutsche Telekom unit reprieve.

The two market leaders, under pressure to increase profit margins, have started to scale back offers of cheap upgrades to devices such as Apple’s iPhone, bringing their approach in line with T-Mobile’s. That, along with cost reductions following a failed deal with AT&T, helped the fourth-largest U.S. carrier improve earnings in the second quarter. “We seem to be entering a new phase in the U.S. market,” said Leon Cappaert, who manages 400 million euros ($497 million) at KBC Asset Management in Brussels including shares of Bonn- based Deutsche Telekom. “Margin pressure in the sector is diminishing significantly, and that may mean a positive surprise on the margins for T-Mobile.”