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Deutsche Telekom raises T-Mobile US stake with SoftBank deal

Deutsche Telekom is deepening its bet on the US market. The giant German firm has struck a $7 billion deal with SoftBank to buy more shares of US T-Mobile, while also selling T-Mobile Netherlands to a consortium of private equity houses.

The deal will give Deutsche Telekom greater control over T-Mobile US, lifting its stake by 5 percent to 48.4 percent to gain almost majority ownership. This furthers CEO Tim Höttges  strategic objective of expanding its focus on the US market by securing direct control over the $170 billion US telecoms operator.

“This is a very attractive transaction for Deutsche Telekom and its shareholders to further benefit from the value creation potential in T-Mobile US and beyond,” said Höttges in a statement. “But we are not just increasing our stake in T-Mobile US, we are welcoming SoftBank as a new key investor and strategic partner for Deutsche Telekom.”

SoftBank will see its equity stake in T-Mobile US drop to 3.3%, while it becomes a 4.5% shareholder in Deutsche Telekom. The Japanese conglomerate will thus become the second-largest private shareholder, and diversify its telecoms exposure across Japan, Europe and the US.

The proceeds for Deutsche Telekom’s purchase will come from the sale of its Dutch unit, T-Mobile Netherlands, to private buyers Warburg Pincus and Apax Partners for $6.1 billion. This will be one of the biggest transactions in European telecoms this year, and speaks to the growing trend of private equity firms snapping up telecoms infrastructure in search of steady returns over the long-term.

According to data from S&P Global, telecoms transactions represented 35% of private equity infrastructure deal value in 2020 – increasing 15% from a year earlier. More evidence of this increased appetite was revealed in May, as Dutch telecom group Royal KPN NV KPN rejected takeover bids from buyout firms EQT AB and Stonepeak Infrastructure Partners.

“This transaction is fascinating for a number of reasons: Firstly, it sees Deutsche Telekom inch closer to having control once again of T-Mobile US – a stated strategic objective; there’s Softbank’s European diversification, a juicy ($6.1bn) PE buyout of T-Mobile Netherlands, and… possibly most intriguingly, the hint of DT looking to increase its share of BT in the UK. There’s no doubt that telecoms M&A is a lively market to operate in at the moment with investors seeing real value in key parts of the market such as digital infrastructure.”

MARCUS ALLCHURCH | Managing Partner
Acuity Advisors

Marcus joined Acuity in 2014, before which he held senior leadership and corporate finance positions with some of the UK’s most successful advisory and telecoms businesses. Roles with EE, KPMG Corporate Finance and BDO Corporate Finance have seen Marcus work in the UK and across the globe with successful entrepreneurs seeking exit, and at board level with multi-national corporates looking for growth through organic and inorganic investment.

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