Deutsche Telekom T-Mobile deal risks patchy signal

Deutsche Telekom AG

22/04/2026 11:31

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Johnson

LONDON, April 22 (Reuters Breakingviews) - Cross border M&A has been out of fashion in telecoms for decades. That may change with a mooted transatlantic deal that could create the world’s largest wireless group by market value. Deutsche Telekom’s DTEGn.DE potential tie-up with T-Mobile US TMUS.O looks less about elusive cost synergies than control – it already owns 53% of its U.S. offshoot. But a full merger won’t eliminate a conglomerate discount – and could expose T-Mobile minority shareholders to a patchy European market.

Deutsche Telekom has been in talks to create a new holding company that would make a stock bid for its own shares, as well as T-Mobile’s, according to a Bloomberg report. The combined value of the new group would be around $260 billion, using the duo’s respective share prices before the deal speculation emerged. If the aim was purely to unlock value for investors, Deutsche Telekom CEO Tim Höttges could simply distribute T-Mobile stock to his shareholders. That he’s taking a different tack suggests he wants room for maneuver in the all-important U.S. market.

Under the current arrangement, Deutsche Telekom would probably resist any M&A deals or capital raises that would dilute its control over the operator. However, the combined group could issue shares and buy up new businesses freely as a single, larger entity. That could also leave it primed to participate in a long-anticipated wave of European telecoms consolidation, too.

Regulation and price controls in Europe are known to be tighter – and the prospect of government intervention is likely to weigh on investors’ minds. It’s therefore likely that the hybrid Deutsche Telekom/T-Mobile US would merit some kind of conglomerate discount. Analysts have long maintained that the German group is marked down by investors because they assign less value to its European operations than to its T-Mobile stake.

At close of play on April 20, the day before Bloomberg reported the potential tie-up, T-Mobile's market cap was almost $218 billion, or 186 billion euros. This means Deutsche Telekom's 53% stake was worth roughly 99 billion euros. Subtract that from the German group's market cap, and you're left with an assumed equity value of 43 billion euros for the non-US parts of Deutsche Telekom. That's a significant discount to the 59 billion euros that analysts at New Street reckon the European business is worth.

The merger doesn't solve this problem. Höttges could instead be playing a long game, hoping to leverage the highly valued U.S. business to do more daring deals in the future. But the issue is the price of this international call will fall squarely to T-Mobile's minority shareholders. It's far from clear what it would take to persuade them to accept it.

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CONTEXT NEWS

Bloomberg News reported on April 21 that Deutsche Telekom is considering a full combination with T-Mobile US, citing people familiar with the matter.

The German telecoms operator has been in talks about creating a new holding company that would make a stock bid for shares of both Deutsche Telekom and T-Mobile, according to the report.

The T-Mobile US stake is behind Deutsche Telekom's superior valuation https://www.reuters.com/graphics/BRV-BRV/znpnmqzaxvl/chart.png

(Editing by Aimee Donnellan; Production by Shrabani Chakraborty)

((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))