Deutsche Telekom to Buy SunCom for $2.4B

Includes: DTEGY, TPC
by: Steven Towns

Deutsche Telekom AG subsidiary T-Mobile USA has agreed to buy SunCom Wireless for $2.4 billion, or $27 per share, representing a 23% premium over its Friday close of $22. The $2.4B takeover price includes assumption of $800M in debt. SunCom has more than 1.1 million wireless subscribers in the southeastern U.S., Puerto Rico and the U.S. Virgin Islands. "The strategic fit of the SunCom operations will make this a near-perfect acquisition. It will round out our domestic footprint, allowing us to serve 98 of the top 100 markets, and will significantly benefit our financial position by reducing roaming expense," said T-Mobile USA CEO Robert Dotson. T-Mobile USA has 27 million subscribers. Cost savings are expected to reach about $1B, primarily from roaming fees and operating costs. Analysts say what appears to be a high acquisition price is justified by the synergies. The deal is expected to close in H1 2008, subject to SunCom shareholder approval and other customary closing conditions. Shares of SunCom Wireless surged 16.6% to $25.65 on Monday. Deutsche Telekom ADRs were unchanged at $19.02.

Sources: Press release, Bloomberg, MarketWatch
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Stocks/ETFs to watch: TPC, DT
Earnings call transcript: Deutsche Telekom AG Q2 2007

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