Deutsche Telekom's best M&A path may be in EU

T-Mobile Us

21/09/2026 09:43

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Liam  Proud
LONDON, Sept 21 (Reuters Breakingviews) - Sometimes success is a curse. Deutsche Telekom's DTEGn.DE 54% holding in $180 billion T-Mobile US TMUS.O has delivered stellar returns, and made the German mobile-to-broadband group into a $150 billion behemoth. Yet it has also created a geographically lopsided company that trades at a discount to the sum of its parts.
Deutsche Telekom, run by CEO Tim Höttges, has a German name but an American financial engine. The relatively fast-growing T-Mobile, whose results it consolidates, accounts for about two-thirds of group EBITDA, after lease payments, compared with a quarter in 2014. The performance of the American business has left the German parent arguably overexposed to the US market, which may soon be disrupted by Elon Musk's SpaceX SPCX.O. It has also led to a conspicuous conglomerate discount on Deutsche Telekom shares.
The clearest way to see this is to strip out the T-Mobile holding, including minority interests and net debt, from Deutsche Telekom's enterprise value. What remains, about $82 billion, is the value investors assign to the assets in Germany, Austria, Poland, Hungary and elsewhere. That implies a lowly 4.8 times multiple of consensus 2027 EBITDA, after lease payments, per Visible Alpha data, whereas regional peers trade at 6.1 on average. 
The obvious financial fix would be to break the group up, perhaps by handing the T-Mobile stake to Deutsche Telekom investors. Shareholders would own all the same assets but without the conglomerate discount, unlocking some $23 billion of value, assuming a 6.1 times 2027 EBITDA multiple for the European business. Yet Höttges may be reluctant to break up his empire, and his German government shareholder has little reason to favour surrendering control of a key American asset at a time when US tech companies dominate Europe.
According to media reports earlier this year, Höttges contemplated the exact opposite: merging Deutsche Telekom and T-Mobile. That idea, which the company didn't comment on, seems to be on ice after investors balked. Shareholders' opposition made sense, since the discount would almost certainly linger, and likely infect investors in T-Mobile too.
Activist investor Elliott Investment Management has turned up with another plan, according to a Reuters report: more share buybacks. It makes sense to repurchase stock at low valuations. Yet this won't address the fundamental reason for the discount: Deutsche Telekom's unwieldy conglomerate structure.
Re-balancing the group towards Europe, through M&A, might help. The grandest possible option would be to merge with France's Orange or Britain's BT, in which Deutsche Telekom owns a 12% stake. Politics make that tricky, however. A simpler option would be to pursue acquisitions in countries where Höttges already has a business. Poland and Slovakia, with $1.1 billion of 2026 EBITDA between them according to analysts' forecasts, are four-player markets that may be ripe for consolidation. So might the German broadband market, whose upstarts have struggled of late.
If Deutsche Telekom needed cash for any of this, it could trim the T-Mobile stake. Merely cutting the holding to 50.1% would raise almost $8 billion, before tax. Höttges may not like the idea of shrinking his crown jewel, but the prize may be a more balanced German-listed group.
Follow Liam Proud on Bluesky and LinkedIn.
     
CONTEXT NEWS
Activist investor Elliott Investment Management has built a stake in Deutsche Telekom and is urging the German group to abandon a potential merger with its American unit T-Mobile US, Reuters reported on September 3, citing two people familiar with the matter.
Elliott would prefer alternative options to unlock shareholder value like larger share buybacks, according to the report.
In August, Deutsche Telekom boosted its 2026 share buyback programme by €3 billion to up to €5 billion, citing low valuation of its shares relative to their historical levels.

(Editing by Neil Unmack; Production by Varun H K)
((For previous columns by the author, Reuters customers can click on PROUD/liam.proud@thomsonreuters.com))