Deutsche Telekom AG

The integration will also cap our adjusted FOCF-to-debt ratio (excluding spectrum) at 3%-5% over 2020-2021. We estimate that this ratio would be 7%-8% for DT excluding Sprint. Because TMUS and Sprint operate in different spectrum bands and partly use different wireless technologies, integrating them carries certain execution risks. For example, we see a possibility of higher churn during the migration of customers to T-Mobile's network. Consolidating their corporate functions is also likely to be time-consuming, given the sheer size of the two companies. In addition to these execution and integration risks, we consider that the enlarged U.S. operations would still be less-established in the market than DT's domestic business. The combined U.S. business would be the No. 3 U.S. mobile

...The acquisition of Sprint will unlock substantial synergies, but high integration costs will initially weigh on FOCF and leverage. Integrating Sprint is estimated to cost about $15 billion over five years and will increase debt at the merged U.S. company. As a result, we forecast that if the deal closes at the start of 2020, consolidated adjusted debt to EBITDA will shoot up to about 4.0x that year. From 2021, we expect it to recede to 3.5x¡4.0x--without the deal it would likely have been about 3.0x over this period. The integration will also cap our adjusted FOCF-to-debt ratio (excluding spectrum) at 3%-5% over 2020-2021. We estimate that this ratio would be 7%-8% for DT excluding Sprint. Because TMUS and Sprint operate in different spectrum bands and partly use different wireless technologies, integrating them carries certain execution risks. For example, we see a possibility of higher churn during the migration of customers to T-Mobile's network. Consolidating their corporate functions...

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