Deutsche Telekom AG (DTEGY) shares traded sharply lower Tuesday following reports that Sprint Corp. (S) may push back its merger talks with T-Mobile U.S., a unit of the German carrier, until later in the summer as it pursues a partnership with cable groups Charter Communications and Comcast Corp. (CMCSA)
Sprint shares were trading 3.7% higher on Tuesday morning at $8.35, after closing at $8.01 on Monday. Comcast shares were down 0.5%.
Deutsche Telekom shares were marked 2.3% lower in the opening 30 minutes of trading in Frankfurt to change hands at €16.25 each and erase all of the stock's year-to-date gains.
The slump followed a report from Reuters that said Sprint had entered talks with Charter and Comcast for a so-called network resale deal that would allow the cable groups to offer wireless services to their customers. The Wall Street Journal has also reported that a deal could include the pair taking an equity stake in Sprint, which is 83% owned by Japan's SoftBank (SFTBY) , in order to provide further network investment.
The talks are expected to be exclusive and last for two months, Reuters reported, ostensibly pushing back any merger plans between Deutsche Telekom's majority-owned T-Mobile U.S. division and Sprint well into the summer.
Earlier this month, Bloomberg reported that while an all-share merger between Sprint and T-Mobile U.S. has been mooted, the two group's parent companies haven't been able to put a deal together as they seek to avoid debt financing in a transaction that would have a potential enterprise value of around $150 billion.
"In our view, this [report on Sprint] likely suggests major hurdles in any Sprint/T-Mobile discussions and could renew speculation of T-Mobile and Dish Network (DISH) should Sprint talks falter," said Jefferies analyst Mike McCormack.
In its last quarterly report, published on May 11, Deutsche Telekom said that "due to the ongoing success of T-Mobile US", has 35.3 million post-paid customers, "generated an increase in adjusted EBITDA of 25.1 percent in the United States operating segment."
CEO Time Hoettges also said at the time that "purely theoretically, we can see several advantages to consolidation and convergence," in the U.S. market. "The strong position we have established for ourselves gives us the time and space to evaluate all options together with colleagues in the U.S."
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