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By Hakan Ersen, Elvira Pollina and Supantha Mukherjee<\/p>\n
BERLIN\/MILAN\/STOCKHOLM, April 22 (Reuters) – Deutsche Telekom is exploring a deal to combine with T-Mobile US and create a transatlantic telecoms giant in what would be the largest ever public merger, two people familiar with the matter said.<\/p>\n
The German group’s shares fell about 5% \u200con Wednesday after news of the talks, first reported by Bloomberg. Telekom already owns a 53% stake in T-Mobile. T-Mobile shares were trading down by around \u200c3.5% on Wednesday afternoon.<\/p>\n
The merger talks, long mooted and still at an early stage, could create a company with a market capitalisation of nearly $300 billion, making it the world’s most valuable telecoms group with more than 200 \u200bmillion mobile subscribers.<\/p>\n
That scale could bolster financial firepower and support further acquisitions, Morgan Stanley analysts said.<\/p>\n
“The real appeal is gaining the benefits of control while still preserving the agility and valuation upside of T-Mobile as a standalone business,” said PP Foresight analyst Paolo Pescatore, adding that T-Mobile has increasingly become the “engine” of Deutsche Telekom.<\/p>\n
Deutsche Telekom’s ownership of T-Mobile dates back 25 years and has fluctuated over time. Since 2020, the German group has moved to tighten its grip. CEO Timotheus Hoettges is chairman of T-Mobile’s board.<\/p>\n
REGULATORS LIKELY TO SCRUTINISE ANY DEAL<\/p>\n
The complex potential deal is \u200caimed at reigniting growth in a stagnating telecoms sector, though \u2060it could face major regulatory and geopolitical hurdles. It comes amid strained diplomatic and economic ties between Germany and the U.S., clouded by tariffs and tensions over the war in Iran.<\/p>\n
Any deal would require support from the German state, Deutsche Telekom’s single biggest shareholder, with a 28% \u2060stake held roughly equally by the government and state-lender KfW, whose holding could be diluted in a merged group.<\/p>\n
“A full merger would see this diluted to 17%-18% at current valuations, below the ~25% threshold which German authorities have signalled would be a threshold for ‘strategic businesses’ in the past,” said BNP Paribas Equity Research senior analyst Sam McHugh.<\/p>\n
Blair Levin, policy adviser at New Street Research, said a deal \u200bwould \u200blikely face heavy scrutiny in the U.S., but was unlikely to be blocked on purely regulatory grounds, \u200beven if it triggered political resistance.<\/p>\n
“The bottom line is that while there \u200cwill be antitrust, national security, and regulatory investigations, those investigations are unlikely to find a problem that results in the U.S. government blocking the deal,” he said.<\/p>\n<\/p><\/div>\n
The fact that Deutsche Telekom already holds a majority share likely alleviates any antitrust concern, said William Kovacic, director of the Competition Law Center at George Washington University.<\/p>\n
But regulatory reviews give Trump’s gatekeepers including U.S. Federal Communications Commission Chairman Brendan Carr a chance to seek unrelated concessions, Kovacic said.<\/p>\n
Last year, the FCC approved two T-Mobile deals that would expand the wireless carrier’s network after the company ended its diversity, equity and inclusion programs.<\/p>\n
Deutsche Telekom and T-Mobile declined to comment. The German government did not immediately respond to a request for comment.<\/p>\n
Burdened by billions of euros \u200cof debt, European telecom companies operate in fragmented, highly competitive markets and have been seeking new \u200bavenues for growth. The talks also come as dealmaking has begun to recover following the Iran conflict.<\/p>\n
COULD BE \u200bBIGGEST PUBLIC MERGER ON RECORD<\/p>\n
Deutsche Bank analysts said a transatlantic group could find \u200bit easier to tap capital markets to pursue cross-border deals in Europe and the U.S.<\/p>\n
A deal also makes strategic sense for Deutsche Telekom as \u200cT-Mobile has become an increasingly important driver of group performance given the \u200bstronger growth profile of the U.S. market compared \u200bwith Europe, analysts said.<\/p>\n
Under the proposal, a new holding company would make an all-share offer for both firms, be owned by existing shareholders and list in both the U.S. and Europe, Bloomberg said.<\/p>\n
Such a transaction would surpass the $202.7 billion Vodafone-Mannesmann merger announced in 1999 – currently the biggest deal on record, according to LSEG data. \u200bDeutsche Telekom has a market value of about $166 billion, while T-Mobile \u200cis valued at about $218 billion.<\/p>\n
T-Mobile’s stock has lost a quarter of its value in the last year, while Deutsche Telekom shares are down about 10%.<\/p>\n
(Reporting \u200bby Thomas Seythal and Hakan Ersen in Berlin, Supantha Mukherjee in Stockholm, Elvira Pollina in Milan, Harshita Mary Varghese in Bengaluru, Jody Godoy in New \u200bYork and David Shepardson in Washington. Editing by Adam Jourdan, Anousha Sakoui and Mark Potter)<\/p>\n<\/p><\/div>\n