Well, now that Sommer is gone, it sounds like the choice for interim CEO is even worse than Sommer was. The stock was up in Germany this morning, and now, we're looking at the worst single day loss I've seen for quite some time. Where will DT's absolute stupidity stop?? Maybe after they've driven the company to bankruptcy. I wonder if lynchings are legal in Germany.
You've asked a couple of questions that I can't begin to answer. I don't know if there's a benefit (or even a possiblity) of a carry-over. Since they've shown nothing but 5 quarters of loss (part of which is from the VSTR write-off), there darned well better be a carry-over. Otherwise, they've just wasted perfectly good write-offs which they could have used later on to offset profits. Their original statement was that they would show a net loss of 5 billion, presumably part of would be due to a VSTR write-off. Now, they've changed their minds on that for some unknown reason. This lack of a decisive plan really bothers me. First, it's one plan, then they change things around. They're supposed to come out with a plan on August 21. We'll know a lot more then.
Germans don't decide quickly. A writedown on VSTR may trigger several writedowns on their 3G licenses and on other wireless companies. They must be scared to hell right now. They also don't understand financial market reactions to such action. Let alone the German press, who might kill them on any write down. That's what's going on at DT IMHO.
So what should they do? I say see reality in the eye, write down VSTR AND the rest and start acting like a grown up. But the strength of the stupid is still their high believe in themselves.
Anyone on this board would be a better CEO of DT.
But, currently they are posting nothing but losses. Do they still pay big taxes while they are reporting losses? Does writing off a major loss while there is no profit have any benefit, or is it better to write this off during years of profit? My understanding is that the losses can be carried forward, but it is not clear to me that this does them any good to do it now. While I am not happy with management, I have to believe that if this is such a no-brainer, then they would do it. There must be a catch.
I'm probably going a little further than I should, but I believe it works this way: If DT had, say, a 5 billion dollar real profit, and they took a 10 billion good-will write-off, they would show a 5 billion loss for tax purposes. In the first case, they would have to pay taxes, and in the second case, they would probably get a tax credit or refund. That's why I'm having trouble figuring out why they would choose to pay taxes instead of getting a refund/credit. Maybe there's more to it than I'm seeing, or maybe there's some long-term benefit I'm not aware of. There's another possiblity, and maybe that's simply that the value of VSTR doesn't meet requirements for reassessing it at a lower value.
How about wait 'til VSTR goes cash positive, package it with all of T including all 3G debt, and spin it off in total. Separate stock is issued in the spin-off T-Mobile. Profit would be zero for the spin-off, so stock price would be in line with the other debt laden telecom. DT stock would be relieved of major debt allowing for increase in stock price. T would have an easier time in a merger without the mother ship.
Goodwill is a one-time non-cash loss that goes directly to earnings per share. For instance, when AOL/TW reported a $54 billion writedown in goodwill in Q1, their EPS was reported as a loss in excess of $12 per share.
1) DT buys AWE for cash? (Not likely/debt issue.)
2) DT buys AWE for stock??
I don't see either of these happening. DT cannot take on additional debt at this level. Even if DT pays in stock, they still pile on additional debt. Unlikely IMO.
3) AWE buys VSTR for cash?
I don't think they have enough cash.
4) AWE buys VSTR for stock?
Their stock isn't worth enough.
5) AWE and VSTR combine to form a new company? DT shareholders are issued shares.
Co-branded company combines extant reputation of AT&T with international image of T-Mobile.
Most likely scenario IMO of the 5. AT&T I think has to rebrand as a part of their divestiture from the mother ship. However, I doubt T-Mobile would be the name. My understanding is that DT would be forced to divest itself of VS, meaning that the new VS/AWE could not use the T-Mobile name as DT would have no ownership interest.
Is your statement that Sihler did something wrong? or anything at all?
Do you have some more insight into the write-down issue?
I am at a loss here to believe that this is anything more than a fall back after a gain, and following the market. Telecom in general is getting crushed.
I really kind of got lost in the problems of the day and didn't quite respond to your comments. What you saw as the results of a bad market and general response to DT just giving back some ground, I saw as a poor market and DT's announcement regarding the lack of a VSTR write-down. It may be coincidence, but shortly after the news release about the VSTR write-down (or lack of it), DT dropped like a rock. I din't really check the DAX to see what it was doing, I just figured since DT was butting heads with all conventional wisdom that DT's new management was showing their lack of eptitude. I hope that isn't the case. I just can't figure out why DT would pass up a 5 or 10 billion euro write-off and pick up whatever tax break they would be entitled to. Whether or not they take the tax break, VSTR's intrinsic value will not be changed. It is what it is.
Back a few weeks ago, DT announced loudly (and almost proudly), what they were going to take a write-off of VSTR's value that would have resulted in DT showing a 5 billion euro loss for the year. Now, contrary to advice of the market and consultants, they say they won't do that. My question is "why"? There's extremely little doubt that VSTR has depreciated by most any metric anyone would care to impose. So, why the reluctance on the part of DT to take advantage of a tax break at this time. I assume that this latest move is going to result in a paper profit for DT which, in turn, will cost them a ton of money in taxes. On the short term, it makes DT look profitable, but the whole scheme is so transparent that it can't possibly fool anyone, and it's going to cost DT over a billion just to look good. All they have accomplished is to defer the depreciation of VSTR to a later date...unless, of course, VSTR manages to appreciate. In any case, I see no advantage to "not" taking the tax loss. It's just like giving a ton of cash away....which is exactly what they'll have to do when they pay taxes. I just can't buy into the idea that VSTR hasn't depreciated. I really hope DT, Sihler, and their advisors are a hell of a lot smarter than they appear.