Deutsche Telekom back in deal mode after strong results

BERLIN (Reuters) – Deutsche Telekom confirmed it was in active talks to sell its Dutch unit, signaling movement on Thursday on its portfolio of non-core assets as it reported a forecast-beating set of second-quarter results and raised its outlook.

Shares in the group, which spans the United States and Europe as well as its German home market, rose 2% to within touching distance of their highest level since the dot-com crash nearly 20 years ago.

CEO Tim Hoettges, on a call with reporters, said the group was “in the middle of a transaction” to sell its Dutch unit.

T-Mobile Netherlands has grown in recent years and doubled profits, he said, but as a mobile-only play lacked a strategic fit with Deutsche Telekom’s other European operations that offer “converged” fixed-line and mobile services.

“We will sell if the price is right,” Hoettges said, confirming a Bloomberg report this week that Indian billionaire Mukesh Ambani’s Reliance Industries was in talks to buy T-Mobile Netherlands.

Hoettges declined to name his price but Bloomberg, citing sources, said Deutsche Telekom was seeking 5 billion euros ($5.9 billion) for the Dutch business.

He said he was still evaluating options for mobile masts unit Deutsche Funkturm, including a partnership with a large towers company, a partial sale or an initial public offering. No final decision has been taken.

Hoettges’ comments signaled a renewed appetite for deals after U.S. unit T-Mobile US took over rival Sprint last year – a transaction that has powered growth and profits.

T-Mobile US beat forecasts and raised its outlook when it reported quarterly results recently – leading Hoettges to follow suit by upping his target for group profits.

Deutsche Telekom now expects adjusted core profit of more than 37.2 billion euros this year, up by 200 million from its previous view.

Reported group revenue declined by 1.7% in the quarter and adjusted EBITDA after leases declined by 4.2%, but after accounting for one-off factors such as exchange rate moves, they were up 6.8% and 1.1% respectively on an organic basis.

Group revenue, core profit and adjusted net profit all comfortably beat consensus estimates in a poll of analysts published by the company, with analysts saying that the non-U.S. business had also outperformed.

“Overall, this is a strong set of results with lots to like, in our view,” said Georgios Ierodiaconou at Citi. ($1 = 0.8517 euros)

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