The US subsidiary of Deutsche Telekom is worth more than 182 billion dollars on the stock exchange.
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san francisco Deutsche Telekom’s US subsidiary, T-Mobile US, has announced a $14 billion share buyback program. As early as this year, securities worth up to three billion dollars could be bought back, T-Mobile announced in a mandatory notification to the US Securities and Exchange Commission.
The entire program is scheduled to run until the end of September 2023. “The exact timing, price and scope of the buybacks will depend on current share prices, general economic and market conditions,” T-Mobile said.
The move could help Deutsche Telekom in particular. Because she does not hold the majority of shares in her US subsidiary. According to calculations by the service provider S&P Global Market Intelligence, Telekom’s stake in T-Mobile US is 48.25 percent. The corporate management in Bonn wants to close the threshold to a majority stake. A special rule secures Telekom the majority of voting rights – but this deal expires in two years.
Actually, Telekom could simply close the majority of shares by buying additional paper. But that would be expensive. The Dax group has already accumulated record debts of 146 billion euros.
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And buying shares would be particularly expensive right now. Because T-Mobile has made strong gains on the stock exchange. For the first time, the company has risen to become the world’s most valuable mobile operator, beating US rivals Verizon and AT&T. At the close on Thursday, T-Mobile’s market capitalization was more than $182 billion.
Thanks to the share buyback, Telekom would not have to buy any new shares in order to acquire a majority stake in T-Mobile. The US subsidiary has already announced: “Deutsche Telekom AG, the company’s main shareholder, currently has no intention of selling common shares as part of the buyback program.” , the percentage share held by the Dax group in its US subsidiary increases.
It was initially unclear what percentage Deutsche Telekom would hold in T-Mobile after the buyback program was completed. T-Mobile initially left a request unanswered.
Expert: $14 billion won’t be enough
The value of the shares ultimately depends on the value at which the shares are bought back. If exchange rates remain constant, the value of the Telekom shares in the subsidiary could increase to more than 52 percent.
Roger Entner, founder of the telecommunications specialist Recon Analytics, was convinced: “The 14 billion dollars will probably not be enough for Telekom to get the majority of the shares.” The reason is a special rule that Deutsche Telekom agreed to due to an acquisition in the USA with the Japanese Investor Softbank had closed. This stipulates that Softbank will be issued additional T-Mobile shares if the mobile operator’s price is consistently above $150 per share for 45 days. At the close on Thursday, T-Mobile shares were worth around $145 a share.
“T-Mobile is doing well. It is very likely that the stock will rise to more than $150,” said Entner with conviction. But that could activate the special rule with Softbank and thus dilute the Telekom share in T-Mobile. “Paradoxically, the management of Telekom in Bonn has to hope that T-Mobile’s price will not continue to rise,” said Entner.
>> Read here: From flop to market leader: T-Mobile becomes the world’s most valuable mobile operator
But there is another way for Telekom and T-Mobile: the share buyback program could be increased. Speaking at a Bank of America conference on Wednesday, T-Mobile Chief Financial Officer Peter Osvaldik said, “We remain optimistic that up to $60 billion in potential shareholder returns are possible in our business between 2023 and 2025. So it’s a great time to be a T-Mobile shareholder.” A year earlier, T-Mobile CEO Mike Sievert announced a $60 billion share buyback program.
The now communicated $ 14 billion for share buybacks could only be the beginning.
More: From flop to market leader: T-Mobile becomes the world’s most valuable mobile operator.