Sunday, 27 September 2020

DT gets boost from Sprint merger, but warns against German Huawei ban

by Harry Baldock, Total Telecom
Thursday 13 August 20

The merger of Spring and T-Mobile is still going to plan, says Deutsche Telekom (DT), but the prospect of a Huawei ban gives them cause for concern in their domestic market

At the start of April this year, after much regulatory delay, the merger of Sprint and T-Mobile in the US finally went ahead, creating the second largest player in the US market. Unsurprisingly, this monster consolidation is already bearing fruit for DT, who reported a net revenue of €27.04 billion for Q2 this year, up around 37…

At the start of April this year, after much regulatory delay, the merger of Sprint and T-Mobile in the US finally went ahead, creating the second largest player in the US market. Unsurprisingly, this monster consolidation is already bearing fruit for DT, who reported a net revenue of €27.04 billion for Q2 this year, up around 37.5% on the €19.66 billion reported at the same time last year.
 
In a conference call today, CEO Tim Hoettges said that the integration of Sprint was still “going to plan”, with synergies between the company and T-Mobile still expected to generate around $43 billion in synergies. The new T-Mobile reportedly ended Q2 with 107.72 million mobile subscribers, up 63.3% from 65.98 million last year.
 
As a result, DT has upped its guidance, with new intentions of core profits reaching $40 billion, above previous targets. 
 
In the same call, Hoettges hinted at interest in further market consolidation, noting that the operator’s impressive financial position at home and abroad left them in a powerful position within the market. 
 
“We have created a currency (in the form of our shares) that protects us against possible takeovers, and a currency that we can also put to work,” he said. 
 
However, the forecast is not all flowers for DT. In the US, integrating Sprint will continue to have a significant impact on the company’s cash flow, while in Germany a national decision surrounding Huawei looms large on the horizon.
 
Last month, DT signed an agreement with Ericsson for 5G RAN, but the company is nonetheless somewhat reliant on the Huawei, with documents published in June suggesting that a removal of their Huawei kit would cost around €3 billion, a scenario likened to ‘Armageddon’.
 
In recent months, DT has been keen to downplay its relationship with the Chinese vendor, though Hoettges still took the opportunity of today’s conference call to voice objections to a total ban, saying that no vendor should be banned on political grounds. Meanwhile, he extolled the virtues of open, cloud-based technology – also known as Open RAN – which would help to expand the RAN ecosystem and circumvent the problem of Huawei altogether.  
 
 
How would a Huawei ban affect Germany’s connectivity landscape? Find out at this year’s Connected Germany
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