Deutsche Telekom Considering Asset Swap for T-Mobile UK

As rumours continue to name ever increasing numbers of companies interesting in bidding for T-Mobile UK, the German parent, Deutsche Telekom could be looking at an asset swap as opposed to a direct cash sale.

Two people familiar with the German telecoms operator told the Financial Times that executives saw a swap for an asset in another country as the "preferred option" to either selling the business or merging it with a UK rival. But they warned that the unwillingness of a would-be bidder to part with another asset and the complexity of dealing with regulators in two countries could make this "dream deal" the most difficult to clinch.

René Obermann, Deutsche Telekom's chief executive was reported to be concerned that a sale of the UK division could throw doubt on the company's ability to remain a global player - leading to an eventual break up of the company.

Deutche Telekom declined to comment on the news report.

Last month, the UK's Guardian newspaper reported that Vodafone had offered to do a swap with Deutsche Telekom for its Turkish subsidiary, although the deal was denied by Vodafone.

Deutsche Telekom is reported to have been coming under pressure to sell the UK arm of T-Mobile due to ongoing poor performance at the mobile network. The German company's management, however, believe new UK chief executive Richard Moat should be given the time to resuscitate it, so as to avoid a fire sale.

In it's quarterly results, Deutsche Telekom wrote down by EUR 1.8 billion (US$2.4 billion) the valuation of T-Mobile UK - giving it a book value of around US$5.3 billion.

On the web: Financial Times - Guardian

Posted to the site on 3rd July 2009