Deutsche Telekom - Selling T-Mobile Would Be "Shortsighted"

DUESSELDORF, Germany -(Dow Jones)- Deutsche Telekom regards its U.S. unit as core to its long-term growth strategy, Chief Executive Rene Obermann said Tuesday while addressing a telecommunications industry event.

Some investors have been suggesting that the German telecoms giant should sell its U.S. unit T-Mobile USA, as it could reap a handsome profit at current market valuations, and return capital to shareholders.

But Obermann said he believed such a move would be "shortsighted" as the U.S. wireless telephone market offers further "profitable growth opportunities."

The CEO also rejected views that there are no synergies between the U.S. wireless unit and Deutsche Telekom's other businesses located in Europe, arguing that the they achieve synergies through "scale-effects" from joint procurement.

T-Mobile USA, one of the smaller U.S. wireless operators with 26 million subscribers and sales of nearly EUR3.5 billion in the first quarter of 2007, has been Deutsche Telekom's main growth driver in recent years.

This helped to ease the impact of Deutsche Telekom's shrinking domestic business due to the emergence of low-cost rivals, and measures taken by regulators to force the company to lower tariffs. Deutsche Telekom lost almost 600,000 fixed-line customers in the first quarter of 2007.

Obermann also said that he doesn't expect Deutsche Telekom, Europe's largest telecoms firm by revenue, is to become a takeover target anytime soon, saying that "I don't believe that we need to expect such a scenario, short-term."

However, the CEO did agree that Deutsche Telekom needs to improve its financial performance and increase its appeal to investors, saying the company needs to do better than the current achievement of 6% return on capital.

Obermann, who became CEO in fall 2006 replacing Kai-Uwe Ricke who resigned following two consecutive profit warnings, has said he wants to expand Deutsche Telekom's wireless business abroad, especially targeting emerging markets.

However, Obermann Tuesday said that a move into new emerging markets, is seen "in the medium to long term" rather than in the near future.

Obermann reiterated his view that the highly fragmented European telecoms market would benefit from further consolidation. Deutsche Telekom last week agreed to acquire France Telecom's unit in the Netherlands for just over EUR1.3 billion, though the acquisition still awaits approval from the Dutch works council of the unit.

Company Web site: http://www.telekom.de

-By Joon Knapen, Dow Jones Newswires; +49-30-28884127; joon.knapen@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 12th June 2007