(For other BUY OR SELL stories, click on [BUYSELL/])
* Bulls see improvement, strategic options for U.S. ops
* Bears negative about future in U.S., iPhone
By Nicola Leske and Christoph Steitz
FRANKFURT, Sept 9 Deutsche Telekom AG
(DTEGn.DE), Europe's biggest telecoms group by sales, has
delivered a stable if uninspiring stock performance, but its
shares may suffer from uncertainty over the future of its U.S.
T-Mobile USA, once the group's cash cow, has been struggling
with customer losses and margin pressure. It is a distant fourth
in the U.S. market behind AT&T (T.N), Verizon (VZ.N) and Sprint
Deutsche Telekom's official strategy is to grow the business
organically, yet some analysts say an exit or partnership would
make more sense.
BUY ON RECOVERY SIGNS
There are signs of improvement in the U.S. business, the
bulls argue. They agree tough decisions need to be made about
the business but argue these are not far off.
T-Mobile has said it does not plan to build a 4G network in
the United States for at least two years and will rely on its
current technology. It could bridge the gap were it to invest in
network provider Clearwire CLWR.O.
According to media reports, Sprint Nextel (S.N) is debating
whether to let a rival operator invest in Clearwire, in which it
holds 56 percent.
"Pressure is building for DT to decide its 4G strategy,"
ING's Lawrence Sugarman wrote in regard to next generation
mobile technology (4G), also known as long term evolution (LTE).
"Investors will respond well to clarity and this may not be
far away. The U.S. remains the biggest swing factor for the
valuation," said Sugarman, who has a "buy" rating on the company.
Devices that are LTE compatible are expected to be available
in the United States next year.
Analysts at Nomura said T-Mobile could also team up with
potential new entrant LightSquared, which has signed a network
contract with Nokia Siemens Networks NOK1V.HE (SIEGn.DE).
"LightSquared's LTE network may offer T-Mobile wholesale
access to provide 4G services," the brokerage said, adding that
it could offer T-Mobile a way to launch an LTE service without
needing to purchase more spectrum.
SELL ON INCREASING INVESTMENT, IPHONE
Merck Finck's Theo Kitz, the top rated analyst for Deutsche
Telekom according to Thomson Reuters database StarMine,
downgraded the stock to "sell" from "buy" this week.
"We believe that, given the margin weakness and the need to
invest billions of (dollars) to upgrade the U.S. grid in the
coming years, a complete sale or IPO of T-Mobile USA would be
the best solution for Deutsche Telekom shareholders," he wrote.
"However, we think that both possibilities are unlikely."
Sources told Reuters in February the company was mulling
options for T-Mobile USA, including a spin-off. [ID:nLDE6140O8]
Analysts at UBS, also rating the stock "sell", pointed to
media reports that the company may lose its position as sole
seller of Apple's (AAPL.O) iPhone in Germany as early as
"This would be a small negative for (the company) in our
view, given ... it previously said it would retain exclusivity
until at least the end of the year. But if it ends in October,
this means T-Mobile would not have exclusivity over the
important Christmas period."
(Editing by David Holmes)