FRANKFURT, May 10 (Reuters) - Deutsche Telekom reported better-than-expected quarterly core earnings on Thursday as it lost fewer customers in the United States and signalled a stabilisation in its European business.
"This was a very satisfying quarter for us," Deutsche Telekom Chief Executive Rene Obermann said in a statement.
"Core operating profit came in in-line with expectation," said analyst Heino Ruland at Ruland Research. "Also it seems T-Mobile-USA did very well."
Deutsche Telekom signalled a stabilisation in its European business, with positive revenue trends in Romania and Greece, but also noted that economic circumstances remained difficult.
On Wednesday, Bloomberg reported T-Mobile USA was discussing a merger with MetroPCS Communications Inc.
The report sparked analysts at BernsteinResearch to say: "T-Mobile and MetroPCS: Oh my, what an ugly baby."
A German fund manager, who asked not to be named, said the deal would make sense in terms of spectrum pooling, and the two companies could realise some operating and capital expenditure synergies.
Looking at the table "Carrier Frequency Use", it appears T-Mobile runs 3G and 4G over AWS spectrum as does PCS. I guess this makes spectrum pooling easier than if T-Mobile was to combine with Sprint. So maybe a merger with PCS makes more sense than S after all.
Inability to combine 3G would be the ugly part I guess, with PCS using CDMA vs. T-Mobile running GSM, but both are using LTE for 4G so no issues going forward.
Combining with a smaller player “isn’t really the option they prefer, but they don’t really have a choice” after the disposal plan failed, Iatrides said, adding that Sprint Nextel Corp. (S) could be a viable, alternative partner. MetroPCS shares climbed 94 cents to $7.50 yesterday. Leap Wireless International Inc. (LEAP), MetroPCS’s main rival in the pay- as-you-go market, rose 12 percent to $5.76. The two companies often trade in tandem, and Leap may be expected to benefit from consolidation in the industry.
Sprint discussed buying T-Mobile USA last year, people familiar with the talks said at the time. It also abandoned a plan to buy MetroPCS, people with knowledge of those discussions said in February. Sprint is on the lookout for deals that would help it pose a more credible threat to bigger competitors Verizon Wireless and AT&T.
A combination of T-Mobile USA and MetroPCS wouldn’t alleviate spectrum constraints the two companies are facing, and the integration of their different wireless standards would be a “logistical nightmare,” Sanford C Bernstein’s London-based analyst Robin Bienenstock wrote in a note today. T-Mobile’s network uses the GSM standard, while MetroPCS’s is based on the code-division multiple access technology.