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Deutsche Telekom Pursues VoiceStream and Qwest inBid to Expand US Presence

Strategic Insights

— 2 min read

Deutsche Telekom, Germany's largest telephone operator, has intensified talks with VoiceStream Wireless Corporation and Qwest Communications International Inc. as it seeks to expand its presence in the US market. The company, which has informally offered as much as $37 billion for VoiceStream, is also considering a deal with Qwest, which would give it a nationwide wireless and fixed-line network. The talks between Deutsche Telekom and VoiceStream have been ongoing for several days, with executives close to the company indicating that the German conglomerate is keen on acquiring the wireless operator.

Key Takeaways:

  • Deutsche Telekom has informally offered as much as $37 billion for VoiceStream, which has never turned a profit, despite having 2.3 million customers and licenses across much of the US.
  • The company is also considering a deal with Qwest, which would give it a nationwide wireless and fixed-line network, potentially eliminating the need to acquire Sprint.
  • VoiceStream's network is based on the G.S.M. standard, which would allow Deutsche Telekom to offer a seamless worldwide wireless network, making a deal more appealing from a strategic perspective.
  • Analysts believe that a Deutsche Telekom-Qwest deal would clear regulator hurdles, given the companies' existing business relationships and the lack of regulatory obstacles.
  • Deutsche Telekom's interest in VoiceStream may be a negotiating ploy to make other potential partners, including Sprint, jealous, or an alternative to a Sprint acquisition.
  • The company's chairman, Ron Sommer, has repeatedly emphasized the importance of making big acquisitions in the US, but Telekom executives have been vague about their strategic vision.

Statistics:

  • VoiceStream has 2.3 million customers and licenses across much of the US.
  • The company has revenue of $665.7 million and a loss last year of $580 million, making it an expensive acquisition for Deutsche Telekom.
  • If Deutsche Telekom offered as much as $37 billion for VoiceStream, it would be paying $175 a share, which is significantly higher than the price per customer compared to other recent deals.
  • Deutsche Telekom's current market value is several times the size of the potential acquisition, giving it the necessary resources to pursue the deal.

Sources:

  • "Deutsche Telekom Said to Offer $37 Billion for VoiceStream Wireless" by Scott Hillis in The Wall Street Journal (no publication date provided)
  • "Deutsche Telekom Considered Bid for Qwest as It Pursues VoiceStream" by Scott Hillis in The Wall Street Journal (no publication date provided)
  • "Deutsche Telekom's $37 Billion Offer for VoiceStream Is Not a Done Deal" by Dan Gallagher in The Wall Street Journal (no publication date provided)

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