With merger, Deutsche Telekom finally has viable plan for US market

With the new announced merger with MetroPCS, analysts say that Deutsche Telekom has given itself a much better path to higher profits in the United States one way or the other.

The specifics of the deal are that MetroPCS will declare a 1-for-2 reverse split, thereby cutting the existing level of stock in half. MetroPCS—the first company in America to launch LTE—will also pay $1.5 billion to its shareholders and acquire all of T-Mobile’s stock. However, Deutsche Telekom will still retain 74 percent ownership in the new company. In other words, the deal has injected the new company (which will still be called T-Mobile) with viability, but provides Telekom with a chance to make a nice profit should the company want to sell its large stake. "A complete exit is probably an overstatement, but this gives [Deutsche Telekom] a relatively simple mechanism for dialing back their exposure in the US market," said Craig Moffett, an analyst with Bernstein Research. "They’ve made no secret of the fact that they’ve been willing to sell it, they’ve talked about IPOing it. You have to take this at face value that this is not an exit from the US market. It is an incremental investment in a stronger US asset, albeit one that has a built-in exit door."