One option

15 September 2009 By Una Galani Follow @ugalani

The German telecom group looks set to solve its UK woes through a joint venture with a larger rival. Copying the trick in the US with troubled Sprint Nextel would be riskier. But it doesn’t have to do that. DT’s position in the US isn t awful and there are other ways to change.

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Deutsche Telekom's two largest shareholders have told the management team led by chief executive René Obermann that it has until the middle of 2010 to turn around its ailing US business, according to the Financial Times.

The report said that the German government, which controls 32% of the telecoms group, and private equity group Blackstone, with a stake of almost 5%, are prepared to force strategic changes if necessary but also believe a deal to transform the business is not yet an option.

On September 8, DT announced that it is in exclusive joint venture talks to combine its subscale TMobile operations in the UK with those of Orange, owned by France Telecom.

Newspaper reports over the weekend suggested DT had appointed investment banking advisers to explore a similar deal in the US to combine its operations in the country with those of rival operator Sprint Nextel.

A spokesperson for DT denied that the Supervisory Board or any other stakeholder had set a deadline to turn around the US business.

On September 14 Sprint shares rose 10% in New York. DT shares fell 1.2%.

Blackstone declined to comment.

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