Deutsche Telekom AG

That said, as the integration progresses, the combination is likely to bring substantial benefits in terms of market share, spectrum holdings, and improved competitive conditions in the U.S. wireless market. It will also offer synergies that could expand DT's unadjusted EBITDA margins by about five percentage points over the following four or five years. In the medium term, Vodafone's acquisition could increase competitive headwinds for DT. Vodafone plans to upgrade 25 million homes (almost its entire footprint) to gigabit speeds by 2022. This would give it a headline speed advantage over the 25 million homes covered by DT, which currently receive 250 megabits per second (Mbps). Although we do not expect customers to see this as a key reason to

...The on-going TMUS- Sprint merger, and potential spectrum outlays in 2021 in the U.S., will significantly weigh on FOCF and leverage over 2020-2021. Integrating Sprint Corp. into T-Mobile U.S. (TMUS) is estimated to cost about $15 billion over five years, and the U.S. subsidiary has higher debt leverage than the Deutsche Telekom AG (DT) group. As a result, this will weigh on S&P Global Ratings' adjusted consolidated debt to EBITDA, which we foresee will shoot up to about 3.7x-3.8x in 2020, from about 3x in the previous two years. In addition, because of potential outlays from the on-going C-Band frequency auction in the U.S., leverage could increase further in 2021. The ratio will then likely recede towards 3.5x by 2023. The higher leverage will also temporarily cap our ratio of adjusted of free operating cash flow (FOCF) to debt (excluding spectrum) at around 5%-7% over 2020-2022. DT's four-year call option on an 8% stake in TMUS, which allows DT to keep the control in TMUS over the long-term,...

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