Deutsche Telekom leverage to increase on T-Mobile-Sprint deal

A Deutsche Telekom logo is seen at the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman

FRANKFURT (Reuters) - Deutsche Telekom DTEGn.DE said its leverage would increase beyond its target corridor as a result of the takeover by its unit T-Mobile US TMUS.O of Sprint Corp S.N, but will return to the comfort zone in 2021.

Deutsche Telekom’s adjusted net debt, as a multiple of its earnings before interest, taxation, depreciation and amortization (EBITDA) will exceed its target corridor of 2-2.5 times following the deal, it said in a statement.

“Strong free cash flow generation of T-Mobile US over the coming years is expected to result in strong deleveraging, bringing the ratio back to the target corridor in 2021,” Deutsche Telekom said.

T-Mobile US agreed on Sunday to acquire Sprint in an all-stock deal for $26 billion that will combine the third and fourth largest U.S. wireless carriers and is expected to attract regulatory scrutiny over its impact on consumers.

Deutsche Telekom will effectively control the merged entity, and expects to consolidate its results, sources have said.

Reporting by Douglas Busvine; Editing by Alexandra Hudson