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November 21, 2005

Deutsche Telekom outlines US expansion plans

Deutsche Telekom AG, Europe's largest fixed-line carrier, has admitted it is looking for acquisitions in the US in order to boost its mobile phone unit T-Mobile USA Inc, the former VoiceStream operator that it bought at the height of the telecoms bubble.

By CBR Staff Writer

Deutsche Telekom’s CFO Thomas Winkler told an industry conference in New York that the carrier would be aiming to expand its mobile communications business in the US partially via takeovers, with regional providers the likely possible acquisition targets.

T-Mobile USA is the principle growth engine of T-Mobile International, the mobile arm of the Bonn, Germany-based carrier. Back in September DT confirmed it would hold on to T-Mobile USA despite reports it would offload it for an estimated price of $30bn, or merge it with another US mobile operator.

This decision was borne out by the latest figures from the operator. T-Mobile USA recently added 1.1 million new customers in the past quarter, but it still remains in fourth place in the US with only 20.3 million subscribers in total. In its two other important markets, namely Germany and the UK, T-Mobile International experienced smaller growth rates. In Germany, it added around 530,000 new customers, while in the UK, it added 259,000. Overall, T-Mobile won a better-than-expected 2.2 million customers, giving a total customer base of 83.1 million customers worldwide, up 80.9 million in the year-ago period.

Deutsche Telekom is already committed to spending as much as $10bn in order to turn its US mobile network into a 3G-compatible operation.

The US mobile landscape has undergone a dramatic sea-change over the past two years, and where there were once six major operators, this has now been whittled down to four. The number-one US mobile operator is Cingular Wireless LLC as a result of its $41bn acquisition of AT&T Wireless Service Inc in February 2004. It recently reported that its customer base grew by 1.1 million during the last quarter to a total of 51.6 million customers.

The second-place operator is Verizon Wireless, the joint venture between Verizon Communications and Vodafone Group Plc, which recently increased its subscriber base by 1.9 million customers to a total of 47.4 million.

In third place is Sprint Nextel Corp, a new entity that was formed after the $36bn acquisition of Nextel Communications Inc by Sprint Corp in December 2004. It has 40 million mobile subscribers.

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Deutsche Telekom bought T-Mobile USA, which was formerly known as VoiceStream Wireless Corp, for $47.5bn in July 2000. In August 2000, it purchased Powertel Inc for $3.72bn.

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