Should Deutsche Telekom Rethink T-Mobile US Sale?

There now are some developing parallels between Vodafone and Deutsche Telekom decisions about their respective (and former) U.S. assets.

Vodafone had to make a hard decision about what to do with its large stake in Verizon Wireless, an asset representing a growing business while many others owned by Vodafone were declining.

And though Deutsche Telekom has for some time wanted to sell its T-Mobile US operation, there might now be some thinking on the part of its board about the possible wisdom of selling an asset that is growing, at the same time other Deutsche Telekom assets are not growing,

In recent weeks, the German company’s board possibly has become split over whether to sell the unit that’s become its only growing asset, Bloomberg reports.

That probably is not unexpected, in some respects. On one hand, Vodafone wanted to sell so it could deploy the assets elsewhere. Deutsche Telekom has the same strategic motivations: there are plenty of other places the new funds could be deployed.

But there is no guarantee of success even if T-Mobile US is sold, and the proceeds invested elsewhere. An old adage from U.S. football is that one “never takes points off the board.”

In other words, to use the analogy, Deutsche Telekom faces giving up a proven growing business to invest in other businesses Deutsche Telekom hopes will grow, but might not.

The “right decision” might have been clearer several years ago, when T-Mobile US still was losing customers, instead of gaining them. Then, the decision would have been easier: sell an asset that is apparently unable to gain market share.

Today, the picture is quite different. T-Mobile US likely will pass Sprint, becoming the third-biggest U.S. mobile service provider for the first time.

Should any mobile service provider faced with flat to declining businesses in most of its other markets, give that up?

On the other hand, done might also reasonably argue that the T-Mobile US story might once again dim, at some point, as T-Mobile US deliberately is sacrificing profit margin to gain share.

At some point, T-Mobile US will have to rethink that strategy and shift to shoring up profit margins, once it has attained a reasonable share of the market.

So, ironically, this might be the best time to sell.