VoiceStream Losses Fall - Sale Rumours Resurge

Deutsche Telekom's USA operator, VoiceStream has reported that it increased its subscriber base by 525,900, including 73,200 through acquisitions during the second quarter of this year. Total customers now exceed 8 million. Contract churn continued to decline, dipping below 2.5% in the second quarter. The pre-pay customer base decreased by 165,800 customers as a result of new programs the company put in place to improve the quality of the prepaid customer base. Contract subscribers now comprise 80% of the 8 million subscriber base compared to 74% at the end of 2001.

"VoiceStream had another very strong quarter. We continued our strong subscriber growth and exceeded our financial targets," said Kai-Uwe Ricke, CEO of T-Mobile International and Member of the Board of Management, Deutsche Telekom. "EBITDA more than doubled from the first quarter while contract subscriber additions reached an all-time high."

VoiceStream reported EBITDA of US$156 million in the second quarter, more than doubling EBITDA from the first quarter. EBITDA margin to service revenues was 13.6%, compared to 6.2% in the first quarter. However, VoiceStream reported a net loss of US$296.3 million, compared with a loss of US$721.6 million in the same quarter last year. The VoiceStream results include Powertel's results.

In related news, The New York Post has reported that Deutsche Telekom has appointed the bankers, Goldman Sachs, J. P. Morgan Chase and Deutsche Bank to look at a possible sale of VoiceStream by this October. If sold, the company is expected to be priced in the $10 billion and $15 billion range, far less than the US$31 billion that DT paid at the height of the telecoms stock bubble.

It is possible that VoiceStream could merge with another operator. While the industry consolidation would be beneficial to the market in the long term and would ensure that the other company did not end up landed with the costs of the acquisition, it would not reduce Telekom's overall debt pile. Cutting debt is Telekom's primary goal at the moment, so a long term strategic merger may have to be forestalled in favour of a quick sale.'"

Posted to the site on 16th August 2002