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MarketScreener Homepage  >  Equities  >  Tokyo  >  SoftBank Group Corp    9984   JP3436100006

SOFTBANK GROUP CORP

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Deutsche Telekom confident U.S. merger will still deliver cost savings

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08/08/2019 | 06:37am EDT
A man walks past the logo of Deutsche Telekom AG at the headquarters of German telecommunications giant in Bonn

FRANKFURT (Reuters) - Deutsche Telekom said on Thursday it still expects the merger of its U.S. unit T-Mobile with Sprint to generate $43 billion in cost savings even after tweaking the deal to secure antitrust clearance.

The U.S. Department of Justice approved the deal, which was struck more than a year ago, after T-Mobile agreed to sell Sprint's prepaid business to satellite TV firm Dish Network Corp to create a fourth U.S. wireless carrier.

However, a lawsuit filed by over a dozen U.S. states seeking to halt the deal is still outstanding and although Deutsche Telekom - which owns 63% of T-Mobile - is open to a settlement, it said it expects the case to go to trial in December.

The merger of the No.3 and No.4 U.S. mobile players would create a business accounting for more than three fifths of group revenue at Deutsche Telekom, which is the leader in its home market and has a broad European presence.

"Our plans to build a bigger, stronger T-Mobile remain unchanged - even after the conditions agreed with the DoJ," CEO Tim Hoettges told reporters, adding he still expected the merger to yield the cost savings originally envisaged.

Deutsche Telekom earlier reported in-line second-quarter results with revenue up 2.9% and core profits rising 3.5% on an underlying basis. It confirmed guidance for profits to reach 23.9 billion euros (22 billion pounds) this year.

U.S. STRENGTH

T-Mobile, which has already reported results, led growth with a 5.1% increase in dollar revenues. Germany lagged with weakness in its consumer internet business and costs related to network upgrades.

The so-called IP migration, which is costing hundreds of millions of euros per year, has prompted some customers to cancel contracts rather than upgrade. German revenues rose by just 1.2% in the quarter.

Some analysts picked up on that weakness, and Deutsche Telekom shares traded 0.8% weaker in Frankfurt. They are down 2% year to date, just outperforming the European sector index <.SXKP>.

Hoettges told reporters that the IP migration would be completed for retail customers by the end of 2019 and for business customers in the first half of 2020.

Updating on the restructuring of troubled IT services arm T-Systems, Hoettges said a recent decision to bundle telecoms services for both large and small business customers at Deutsche Telekom would be good for clients and revenues.

He also said plans to carve out T-Systems' cybersecurity and industrial internet businesses would position them as profit and growth centres, rather than service organisations. The units were not for sale, he added.

The further shakeup at T-Systems, where CEO Adel Al-Saleh has already let go thousands of staff in a restructuring exercise, will be put to Deutsche Telekom's supervisory board for approval.

(Reporting by Douglas Busvine; editing by Tom Sims, Michelle Martin, Kirsten Donovan)

By Douglas Busvine

Stocks mentioned in the article
ChangeLast1st jan.
AT&T 1.06% 37.15 Delayed Quote.28.80%
DEUTSCHE TELEKOM AG 0.28% 15.248 Delayed Quote.2.60%
DISH NETWORK CORPORATION -0.37% 35.44 Delayed Quote.42.45%
SOFTBANK GROUP CORP 0.37% 4616 End-of-day quote.-34.10%
SPRINT CORP 0.15% 6.74 Delayed Quote.15.64%
T-MOBILE US 1.10% 81 Delayed Quote.25.96%
VERIZON COMMUNICATIONS 0.08% 59.98 Delayed Quote.6.49%
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Financials (JPY)
Sales 2020 9 738 B
EBIT 2020 1 308 B
Net income 2020 1 431 B
Debt 2020 10 936 B
Yield 2020 0,83%
P/E ratio 2020 6,34x
P/E ratio 2021 14,2x
EV / Sales2020 2,10x
EV / Sales2021 2,18x
Capitalization 9 558 B
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Mean consensus BUY
Number of Analysts 17
Average target price 7 187,50  JPY
Last Close Price 4 616,00  JPY
Spread / Highest target 130%
Spread / Average Target 55,7%
Spread / Lowest Target 31,1%
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Managers
NameTitle
Masayoshi Son Chairman, President & Chief Executive Officer
Raul Marcelo Claure Chief Operating Officer & Director
Norikazu Oba Manager-Finance & Planning
Tadashi Yanai Independent Outside Director
Ken Miyauchi Representative Director & Vice President
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