German telecom operator Deutsche Telekom is reportedly exploring a possible merger with the USA’s T-Mobile, reports Bloomberg. The source suggests that the discussions are still at an early stage. However, they point to a bigger shift in how the two telecom companies are thinking about scale and competition. If the merger goes forward, it would create the world’s largest telecom company in terms of market valuation.
The telcos are planning to combine operations into a single massive operator
According to the report, Deutsche Telekom is considering creating a new holding company. It would provide shares in exchange for the stock of Deutsche Telekom and T-Mobile. Discussions on Deutsche Telekom’s merger with T-Mobile are still in the early stages. The farmer currently owns a majority of 53 percent of T-Mobile, giving it much direct control over the telecom market in the US.
Merging the two companies would bring the two sides together permanently under one roof. As for T-Mobile, it currently boasts a market valuation of around $218 billion, while Deutsche Telekom sits slightly lower with a valuation of approximately $166 billion. If the merger happens, it would create the world’s most valuable wireless provider.
It’s worth mentioning that the stock market reacted wildly to the early merger rumors. T-Mobile’s shares bumped briefly from $196.65 to $205.09 in just a few minutes. However, by the end of the regular trading day, T-Mobile closed at $195.39, falling $2.97 or 1.5 percent.
The deal faces major regulatory hurdles before going official
It’s worth noting that any deal involving T-Mobile would draw attention from the US regulators. Telecom mergers have a history of strict review. The regulatory authorities closely watch corporate buyouts to make sure a single entity doesn’t have too much control over the market. Thus, the regulators will look at how Deutsche Telekom and T-Mobile’s possible merger would affect everyday phone bills for end users.
Deutsche Telekom is reportedly figuring out the exact financial details of buying up the remaining shares of T-Mobile it doesn’t already own. Neither Deutsche Telekom nor T-Mobile has officially confirmed these rumors. We will keep an eye on any new information and keep you updated, so stay tuned for more details.
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