Most of the fallback options which Deutsche Telekom must have weighed up, when its sale of T-Mobile USA to AT&T collapsed, have come to nothing. But an unexpected new one may have emerged, in the shape of Sol Trujillo, formerly CEO of Australia’s Telstra and before that of Orange. According to Bloomberg, he is trying to interest private equity firms in buying some or all of the fourth US cellco.
Trujillo, who is also said to have shown an interest in Sprint, has been in talks with Blackstone Group, KKR and others, said sources, though none has taken up his plan as yet. Although financing is relatively cheap in the current climate, encouraging such deals, the size of a full buyout may daunt the equity firms ‘ the subsidiary could be worth $30bn, especially if it improves its spectrum position via the proposed frequencies swap with Verizon Wireless.
TMo has been struggling to retain customers and is well behind its rivals in the race to build LTE, but it has embarked on a cost cutting program, including the sale of towers, since the failure of the AT&T plan and also has an ambitious roadmap to refarm its AWS and PCS spectrum to create an advanced 4G system. It also gained a hefty chunk of spectrum and cash from AT&T as a break-up fee.
Despite these moves to brighten its future outlook, DT would still like to offload its US arm, and divert the proceeds towards higher growth markets such as those in eastern Europe, to reduce debt and to invest in its most successful assets closer to home. Various options have reportedly been discussed, such as merger with Sprint or MetroPCS, but have not turned into reality. A private equity transaction should find it easier to get regulatory approval as it would not reduce the number of carriers in the US market, one of the key concerns about the AT&T proposal.
Trujillo, despite a difficult spell at Telstra, has a wealth of experience of running telecoms operators, having started at AT&T and been CEO at Baby Bell US West and Orange too.