Deutsche Telekom mulls selling UK joint venture

Germany's largest telephone company Deutsche Telekom AG (DTE) is evaluating options of selling its stake in its British joint venture with France Telecom, just 29 months after creating UK's top mobile company, Bloomberg today reported, citing people with knowledge on the matter.

Deutsche Telekom is in early stages of deciding whether to sell its half of the Everything Everywhere mobile- phone joint venture as the Bonn-based mobile operator seeks to raise cash to cut debt and upgrade its network in Germany and other European countries.

The move may have been triggered after Deutsche Telekom failed to raise cash through its proposed sale of its US subsidiary T-mobile USA in December 2011 to AT&T for $39 billion amid opposition from US regulators. (See: AT&T drops proposed $39-bn T-Mobile USA takeover)

Deutsche Telekom has yet to hire investment banks and will not take a decision to exit the UK before later this year until it improves operational performance first, the report said.

With the UK mobile market being one of the most competitive in Europe, Deutsche Telekom decided in September 2009 to merge its T-Mobile UK with Orange UK owned by France Telecom and create a new 50:50 joint venture company called Everything Everywhere.

The merger created the UK's leading mobile operator with a combined customer base of around 28.4 million and a market share of around 37 per cent, ahead of their largest rivals - Spanish group Telefonica's 27 per cent and Vodafone's 25 per cent.

France Telecom may buy out its German partner's stake in Everything Everywhere, or a process to seek a third-party buyer for the entire operator, such as a group of private-equity firms or other phone operators, the people told Bloomberg.

But France Telecom, which is now planning to shed assets in Europe and refocus its business on fast-growing emerging markets in Africa and the Middle East as mobile revenue in Europe stalls, could find it difficult to fund the buyout.

It is already planning to spend $2 billion to acquire most of billionaire Naguib Sawiris's stake in their Egyptian wireless venture, while divesting its Orange Switzerland mobile-phone unit to the London buyout firm Apax Partners for $2.1 billion and is also planning to dispose of its Portuguese and Austrian assets.

Deutsche Telekom, whose stock has lost 8.5 per cent of its value last year needs money to cut debt by $17 billion and repurchase €5 billion of its own shares. It also needs funds to upgrade its fibre and wireless networks in Germany and other European markets.