Thursday, 23 April 2009

Is T-Mobile putting UK, Poland and US opcos up for sale?

Deutsche Telekom issued a surprise profit warning yesterday, sparking further speculation that it will sell off problematic subsidiaries. T-Mobile UK saw revenue fall by 21 percent, while T-Mobile US and Polish subsidiary PTC also faced problems.

It's all very well to speculate that T-Mobile might be unhappy with the results at some of its subsidiaries, it's quite another to expect a disposal of key strategic business units. DT CEO Rene Obermann ascribed the poor performance to three factors: economic conditions, tough competition and currency fluctuations. That seems fair enough. There are a few other issues to resolve at T-Mobile UK, for instance, but the major problems facing the struggling opcos are not specific to them. That being the case, it would be premature to assume that DT now wants to dispose of those assets. Even more importantly, it's difficult to see who would be able to buy them.

Back in October 2007 T-Mobile paid €1.3 billion for Orange Netherlands, working out at about €625 per subscriber. In the current economic climate we would expect that figure to be lower, but even at €400/subscriber T-Mobile UK would cost €7 billion. Is there anyone out there with that sort of money? It's unlikely that any other European MNO would be willing to pay that much to step into the UK market, even if there were viable candidates. It's also unlikely that any of the other UK MNOs would be willing to buy them out to take a competitor out of the market. If they were willing to do that surely one of them would have taken 3 out of the market years ago to put paid to their disruptive influence.

So that leaves the UK fixed line players: BT and Virgin. BT clearly has ambitions to get back into the mobile market. Virgin is already an MVNO on T-Mobile's network and has been one of the more aggressive providers of fixed-mobile bundles. The acquisition of T-Mobile makes some sense for both of those. But with a €7bn price tag?

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