Bulletin: Deutsche Telekom AG's Call Option On Up To An 8% Stake In T-Mobile U.S. Could Be Within Rating Headroom From 2021

PARIS (S&P Global Ratings) June 24, 2020--S&P Global Ratings today said that any debt funding of the call option provided by Softbank to Deutsche Telekom AG (DT; BBB/Stable/A-2) on an additional 8% stake in DT's 43%-owned subsidiary T-Mobile U.S. (TMUS) would likely be within rating headroom from 2021 onward. However, DT's funding choice between cash and shares would be critical in preserving or removing any rating upside potential in the next three-to-four years. At TMUS' current share price, we estimate the value of the underlying 8% stake at about €9.5 billion. If DT decided to exercise and cash fund the option, the additional debt would likely be within our rating tolerance as soon as 2021. Headroom would then likely become

...June 24, 2020 PARIS (S&P Global Ratings) June 24, 2020--S&P Global Ratings today said that any debt funding of the call option provided by Softbank to Deutsche Telekom AG (DT; ###/Stable/A-2) on an additional 8% stake in DT's 43%-owned subsidiary T-Mobile U.S. (TMUS) would likely be within rating headroom from 2021 onward. However, DT's funding choice between cash and shares would be critical in preserving or removing any rating upside potential in the next three-to-four years. At TMUS' current share price, we estimate the value of the underlying 8% stake at about 9.5 billion. If DT decided to exercise and cash fund the option, the additional debt would likely be within our rating tolerance as soon as 2021. Headroom would then likely become more comfortable from 2022 onward, since we expect the group to steadily deleverage after a spike in 2020 following the acquisition of Sprint Corp. by TMUS. That said, ultimate rating headroom would be more limited if TMUS' share price materially increased....

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