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updated: 8/7/2014 8:12 AM

T-Mobile US owner sees no offers that beat standalone value

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Bloomberg News

Deutsche Telekom AG, which controls the fourth-largest U.S. wireless operator T-Mobile US Inc., hasn't received any offers for the business that exceed its standalone value, its chief executive officer said.

"We're open to a transaction that creates value for all T- Mobile US shareholders, compared with continuing the business on its own," Timotheus Hoettges said today on Deutsche Telekom's earnings conference call. "Right now, there's no such offer on the table."

Hoettges's effort to exit the U.S. market received a setback this week as Sprint Corp. withdrew from talks to buy T- Mobile over conditions of the deal and concern that regulators wouldn't approve a combination of the third- and fourth-largest wireless operators in the nation. The CEO signaled he's ruling out a bid made by French operator Iliad SA, which he said had surprised him.

T-Mobile will play a central role in "any future changes in the market," Hoettges said. The U.S. carrier helped boost Bonn-based Deutsche Telekom's second-quarter earnings as it snatched market share after bolstering its network and undercutting the offers of its rivals.

Shares of Deutsche Telekom rose 0.2 percent to 11.56 euros at 12:55 p.m. in Frankfurt. They had declined 7.2 percent this year through yesterday.

U.S. regulators need to stop looking at the wireless market by itself and consider the blending of the phone and cable industries, Hoettges said. He was referring to deals such as AT&T Inc.'s planned acquisition of DirecTV and the proposed takeover of Time Warner Cable Inc. by Comcast Corp.

Network Investments

Tom Wheeler, chairman of the U.S. Federal Communications Commission, said yesterday that "four national wireless providers is good for American consumers." Hoettges responded that yesterday's slump in share prices of Sprint and T-Mobile "couldn't have been a clearer signal" that such thinking damages the smaller operators.

T-Mobile is likely to require billions of dollars of investments in network quality and customer acquisition in the coming years. Hoettges reiterated that the No. 3 and No. 4 carriers need assistance from regulators for the 2015 auction of 600-megahertz spectrum because they can't muster the funds commanded by larger AT&T and Verizon Communications Inc.

Iliad is seeking partners to help finance its bid and allow it to make an offer for a larger stake in T-Mobile US, a person familiar with the discussions said this week. The French carrier last week offered $33 a share for a 56.6 percent stake.

"They still plan to leave the U.S., and that's smart because long-term they're in a dead end," Wolfgang Specht, an analyst at Bankhaus Lampe KG in Dusseldorf, Germany, said of Deutsche Telekom. "Spending had been focused on the U.S. to dress up the bride, and that's largely done now."

German Spending

The carrier today reported an increase in profit for the quarter through June as it shifted network investments to its German home market, where spending rose 58 percent. Hoettges has vowed to revitalize the carrier's operations in its home region through investments in fixed-line and mobile assets.

At the same time, the company is taking a breather in the U.S. Network spending in that country fell 14.7 percent as the company's long-term evolution, or LTE, grid neared completion.

Earnings before interest, taxes, depreciation, amortization and excluding some items rose 0.3 percent to 4.43 billion euros ($5.9 billion). Analysts had projected adjusted Ebitda of 4.39 billion euros, the average of 12 estimates compiled by Bloomberg.

Forecasts Confirmed

Net income rose 34 percent to 711 million euros, helped by a gain from a spectrum swap with Verizon in the U.S. Deutsche Telekom confirmed its full-year forecasts. Sales slipped 0.3 percent to 15.1 billion euros, compared with the 15.2 billion- euro average estimate.

Other large European carriers have been less successful at stemming a revenue decline in the region's saturated markets. Spain's Telefonica SA and France's Orange SA last week posted sales drops of 12 percent and 5.2 percent, respectively.

In Germany, which accounts for more than a third of sales, Deutsche Telekom is set to face an enlarged competitor following regulatory approval of the merger of Telefonica's and Royal KPN NV's operations in the country.

The adjusted Ebitda margin in Germany increased to 41.3 percent as it added 275,000 contract customers and gained market share from its peers, including Vodafone Group Plc.

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