DT say's wireless unit may be lower due to competition

[Fire14]

Deutsche Telekom Says Mobile Unit May Not Meet Targets

Deutsche Telekom's mobile unit may not be able to achieve its targets in Europe due to increasing competition, the company said in its 2005 filing with the Securities and Exchange Commission, or SEC.

"If prices for mobile telecommunications services continue to decline (in Europe)...T-Mobile may not achieve its targets," the company said in a document filed with the SEC on March 27, 2006.

The German telecom incumbent said: "Competition in the European mobile telecommunications markets has increased and can be expected to increase in the future," noting the entry of low-cost carriers and market consolidation such as the acquisition of UK's O2 by Telefonica from Spain.

T-Mobile International is Deutsche Telekom's mobile communications unit that runs wireless network operators in Europe and the U.S. Earlier in March, T-Mobile Chief Executive Rene Obermann said that he anticipates mobile tariffs to drop by 20% in Germany.

Tariffs for calls over mobile phones in Germany and across Europe are falling due to intense competition from cut-price rivals and the regulator-enforced lower termination rates.

"As European markets have become increasingly saturated, the focus of competition has been shifting from customer acquisition to customer retention, and increasing the quality and value of existing customers," Deutsche Telekom said in the SEC filing. "Accordingly, if we are unable to offer increased quality and better value to our customers, our market share and revenues may not grow as we have anticipated in our growth plans."

The Bonn-based company issued in March 2005 a document with an outline of its 10-year planning, with a forecast that its net profit will more than double during that period to reach EUR11.5 billion by 2014, compared with a net profit of EUR4.6 billion in 2004, driven by growth of its wireless and high-speed Internet businesses. It added that it expects sales to increase by 46% to EUR84.8 billion in 2014 from EUR57.9 billion in 2004.

Deutsche Telekom also warned for a possible adverse effect on the earnings of its wireless operator in the U.S., T-Mobile USA, due to past market consolidation.

Over the last two years, Cingular Wireless acquired AT&T Wireless, Sprint bought Nextel to form Sprint Nextel, Verizon Communications took over MCI Inc., SBC Communications Inc. bought AT&T Corp. to form AT&T Inc., and Cingular parents AT&T and BellSouth plan to merge.

"Each of T-Mobile USA's three remaining national competitors...are significantly larger than T-Mobile USA, with largest spectrum holdings and more than double the customer base," Deutsche Telekom said in the SEC filing. "Their scale could afford them significant structural and competitive advantages. Thus, this situation presents a long-term challenge to T-Mobile USA to effectively compete in pricing, products, coverage and the introduction of new technology and services."

T-Mobile USA has been Deutsche Telekom's key growth driver of its wireless unit in the past years, and helped stem the decline of the company's domestic fixed-line business on its group results.

"Since T-Mobile USA is a significant contributor to our overall revenue and customer growth, a slowdown or decline in the business of T-Mobile USA could have a material adverse effect on the attainment of the growth targets of our group as a whole," Deutsche Telekom said.

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

[bobolito]

Well, if T-Mo USA wants to minimize disadvantages to its competitors, they should wake up and get more aggressive. They should've done this a long time ago. How did Cingular, Verizon and Sprint get so big? They bought other companies and merged! Why can't T-mobile do the same? There are still some regional competitors out there. Acquiring them can improve T-Mobile's weak spectrum position and increase market share. They better not let go of the opportunity in this year's 3G spectrum auction or they will be in trouble in the long run.

[Matt]

I don't think anything in the article above should be a surprise. DT has made similar statements in past years in their annual filings. DT has also stated that they will be active in the June auction, and will (attempt to) buy some regional carriers....now it's time for them to follow up and do it.

[MOTOhooligan]

Originally Posted by Matt

DT has also stated that they will be active in the June auction, and will (attempt to) buy some regional carriers... now it's time for them to follow up and do it.

Indeed, if they don't step up in the June auction, they will be in some serious trouble. However, if they pick up the right combination of regional providers they could still compete in the US.

They have to make some big moves in the next two years or so to stay alive.

[ShoresGuy]

Ok so let's mention some of the regional candidates then.....:

Dobson is probably high on their list. Western Wireless might be an unlikely candidate since Alltel already acquired them last year but WW has GSM.

[EdwardP]

Originally Posted by Matt

I don't think anything in the article above should be a surprise. DT has made similar statements in past years in their annual filings. DT has also stated that they will be active in the June auction, and will (attempt to) buy some regional carriers....now it's time for them to follow up and do it.

Such statements, I believe are required under U.S. securities law.

If one looks at a company's Annual Report on Form 10-K (the foreign company equivalent is the Form 20-F), it will include similar statements about their competition, competitors, some competitors are larger than they are and have more resources than they do, etc.

[Andy]

Originally Posted by ShoresGuy

Ok so let's mention some of the regional candidates then.....:

Dobson is probably high on their list. Western Wireless might be an unlikely candidate since Alltel already acquired them last year but WW has GSM.

I thought that Western Wireless was now ALLTEL...what am I missing?

[EdwardP]

Originally Posted by ShoresGuy

Ok so let's mention some of the regional candidates then.....:

Dobson is probably high on their list. Western Wireless might be an unlikely candidate since Alltel already acquired them last year but WW has GSM.

Rural Cellular Corporation. They operate as Unicel in New England. T-Mobile roams on them in Vermont. Excellent Unicel roaming coverage on I-89.

CellGuru's web site has a northern New England and New York coverage map for Unicel. Some of their service areas in New England are also CDMA/TDMA though, I'm sure T-Mobile (if DT were to acquire RCC) would convert those to GSM.

[Andy]

Originally Posted by EdwardP

Rural Cellular Corporation. They operate as Unicel in New England. T-Mobile roams on them in Vermont. Excellent Unicel roaming coverage on I-89.

CellGuru's web site has a northern New England and New York coverage map for Unicel. Some of their service areas in New England are also CDMA/TDMA though, I'm sure T-Mobile (if DT were to acquire RCC) would convert those to GSM.

Yes they would convert those areas to GSM as they want nothing to do with CDMA/TDMA technology and it would be stupid not to.

[Etorres777]

Well at least I know that DT and I are on the same page.

[dehaven.j]

Originally Posted by EdwardP

Rural Cellular Corporation. They operate as Unicel in New England. T-Mobile roams on them in Vermont. Excellent Unicel roaming coverage on I-89.

CellGuru's web site has a northern New England and New York coverage map for Unicel. Some of their service areas in New England are also CDMA/TDMA though, I'm sure T-Mobile (if DT were to acquire RCC) would convert those to GSM.

Lets not forget about centennial wireless. Tmobile roams on them here in Indiana especially in the rural areas like where i live. In the City I live in Centennial is the dominant carrier almost everyone here has them. Tmobile is available in about half of the city and in the other half they rely on Centennial's network. Centennial also has a fairly good network here in northern indiana.