* DT group open to all options in the United States
* Bloomberg says the two had held on and off talks
* Deal would be difficult, analysts say
* DT stock ends up 3.95 percent, Sprint up 4.9 percent
By Nicola Leske and Sinead Carew
(Rewrites, adds analyst comments, updates shares)
FRANKFURT/NEW YORK, March 8 Deutsche Telekom AG
(DTEGn.DE) is keeping its options open for a T-Mobile USA deal,
but the German operator has no clear path to catch up to far
larger rivals in the United States.
The company has made no secret of the fact that it has held
talks with smaller companies such as Clearwire Corp CLWR.O
and Harbinger-backed start-up LightSquared about a potential
spectrum deal with its U.S. operation, T-Mobile USA.
Deutsche Telekom has also quietly discussed with bigger
rival Sprint Nextel Corp (S.N) a potential sale of T-Mobile USA
in exchange for a stake in the combined company, according to a
Deutsche Telekom is open to all options in the United
States, Chief Financial Officer Timotheus Hoettges said in an
email. Hoettges said the operator was not pressed for time,
although the company acknowledged earlier that it needs access
to more wireless spectrum in coming years for data services.
T-Mobile USA, ranked a distant fourth in the U.S. mobile
market, and Sprint, the No. 3 U.S. operator, declined to
comment on deal talks.
A deal with Sprint would create a much bigger third U.S.
mobile provider to compete with the dominant operators Verizon
Wireless and AT&T Inc (T.N).
Combining the two companies' incompatible technologies,
however, would make the deal complex.
Sprint and T-Mobile USA are expected to eventually move to
similar technology, but Nomura analyst Michael McCormack said
this was likely "many years from fruition."
Proceeding with a deal could risk repeating Sprint's
Sprint has only recently started turning around customer
losses after its 2005 purchase of Nextel, another operator with
an incompatible network. That deal led to steep and prolonged
customer defections at Sprint.
A deal with T-Mobile USA, which has also been losing
customers, would "further exacerbate the challenges" at Sprint,
Complicating matters, Sprint also depends on wireless
spectrum owned by Clearwire for its high-speed wireless
offerings. Sprint is a 54 percent owner of Clearwire.
Two weeks ago, Deutsche Telekom Chief Executive Rene
Obermann told Reuters Insider TV that he ruled out buying
Sprint Nextel but said the company was looking at partnerships
to mitigate future spectrum needs. [ID:nRTV194510]
Obermann has repeatedly said the company would not make any
T-Mobile USA, formed out of Deutsche Telekom's purchase of
U.S. operator Voicestream in 2001, was long a major revenue
contributor but has turned into a headache for the German
company due to customer losses in recent quarters.
T-Mobile USA has lost out to smaller rivals like Leap
Wireless International Inc LEAP.O and MetroPCS Communications
Inc PCS.N, as well as bigger rivals such as AT&T and Verizon
Wireless, a venture of Verizon Communications (VZ.N) and
Vodafone Group (VOD.L).
The company has "reached a crossroads where they need to
explore strategic options," said Ben Abramovitz, analyst at
In an effort to address spectrum needs, T-Mobile USA has
said it was considering partnerships with companies such as
Clearwire and Harbinger-backed start-up LightSquared, both of
which have the capacity to lend wireless spectrum to other
T-Mobile USA is also the main bidder in a spectrum auction
Clearwire is holding, sources have said. [ID:nN19254463]
Clearwire, which badly needs new funding to expand its
network, has said it would work on resolving a dispute with
Sprint before it can make a decision on any spectrum sale.
In January, Obermann said T-Mobile USA could look to sell
its U.S. broadcast cellular towers, which could fetch up to $2
billion and could be used to fund any spectrum purchase.
Deutsche Telekom had looked closely at Sprint in 2008, a
source close to the company said at the time, since the U.S.
company announced a huge goodwill write-off in February of that
year, but had backed away from any deal.
This time around, Sprint is faring better and that may put
the company at an advantage. "In this position Sprint is in the
catbird seat," Abramovitz said.
Deutsche Telekom shares finished up 3.95 percent at 10.01
euros, while Sprint shares closed up 4.9 percent at $4.70.
(Reporting by Peter Maushagen and Nicola Leske in Frankfurt,
with Jennifer Saba, Sinead Carew and Nadia Damouni in New
York; Editing by David Holmes, Dave Zimmerman)