Activist investor Elliott Investment Management has reportedly built a substantial stake in Deutsche Telekom and is pushing the German telecom giant to drop its plans for a full merger with its U.S. subsidiary, T-Mobile US. Instead, Elliott suggests that Deutsche Telekom explore other methods to unlock value for shareholders, such as implementing larger share buybacks. The exact size of Elliott's stake in Deutsche Telekom has not been publicly disclosed.
This development comes after earlier reports indicated Deutsche Telekom was exploring a deal to fully combine with T-Mobile US, aiming to create a transatlantic telecommunications powerhouse. Deutsche Telekom currently holds a nearly 54% stake in T-Mobile, which is its primary earnings driver. However, reports in July revealed that T-Mobile's U.S. executives had informed Deutsche Telekom they no longer supported such a merger, citing concerns from non-controlling shareholders and potential U.S. regulatory hurdles.
The proposed $300 billion merger would have created the world's largest wireless operator by market value. T-Mobile US has a market capitalization of approximately $200 billion, while Deutsche Telekom's market capitalization is around $157 billion. T-Mobile has demonstrated stronger percentage growth in service revenue, EBITDA, and free cash flow compared to its parent company, leading to investor concerns about combining the faster-growing U.S. unit with the slower-growing European entity. T-Mobile's shares rose about 3% following the news of Elliott's involvement and opposition to the merger.
