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Deutsche Telekom willing to engage with states opposing Sprint/T-Mobile deal

Deutsche Telekom AG CEO Timotheus Höttges said during the company's earnings conference call that it is willing to engage with state attorneys general who have filed a lawsuit against the merger between its U.S. unit T-Mobile US Inc.'s and Sprint Corp.

The U.S. Department of Justice conditionally approved the deal after the parties agreed to divest Sprint's prepaid business to DISH Network Corp., but some analysts say the lawsuit from more than a dozen AGs, led by New York and California, could delay the wireless transaction's closing by at least several more months.

"Clearly, the states filed their lawsuit before our agreement with the DOJ. And therefore, we believe that a lot of the remedies ... are addressing their concerns already," Höttges said during the call. "Nevertheless, we will be willing to engage with the state AGs, including those who are part of the lawsuit, to find kind of a reasonable agreement."

DISH is also acquiring 14 MHz of Sprint's nationwide 800 MHz spectrum and will have access to T-Mobile's network for seven years as it rolls out 5G technology, which is set to offer download speeds many times faster than the current 4G LTE wireless networks. The $43 billion synergies expected from the deal are "confirmed," Höttges said, despite Sprint recently missing operational performance targets.

"I'm not commenting on any kind of internal discussions whether this business is in fact delivering on [operational expenditure] and capex synergies. If you want to realize the value, you need the total business and not only half of it. You need it all," he said.

Turning to Europe, the telco on the call faced questions over whether it will follow rival Vodafone Group PLC's example and seek to monetize its cell-tower assets. Vodafone recently announced it would spin off its European tower portfolio, pleasing investors and analysts.

Höttges said Deutsche Telekom's Dutch towers have been carved out already and that it is "working on" its Austrian portfolio. Its German towers have been legally separate since 2002.

"This business is heavily growing and today it is 100%-owned by Deutsche Telekom shareholders. So the moment we monetize that business, that moment, we might lose this opportunity," he said. "Therefore, we have to find the right timing to monetize this business."

Deutsche Telekom net revenue for the June quarter was €19.66 billion, up 7.1% year over year from €18.37 billion. Its U.S. operations contributed €9.83 billion in revenue, up 11.4% year over year from €8.82 billion.

Group unadjusted net profit for the quarter was €944 million, or 20 cents per share, up from €495 million, or 10 cents per share, a year ago.

Deutsche Telekom reiterated in its earnings release it expects final regulatory approval for the T-Mobile/Sprint merger in the third quarter of 2019.