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FollowingCore Highlights
Aggressive hedge fund Elliott Investment Management has taken a stake in Deutsche Telekom and urged the telecommunications giant to abandon plans to merge with T-Mobile US.
Conditions for a full valuation recovery
According to Bloomberg, activist investor Elliott Investment Management has established a position in Deutsche Telekom and urged the company to abandon its proposed merger with T-Mobile US. The news sent T-Mobile US shares up 2.82% to close at US$187.30 on Wednesday, while Deutsche Telekom shares rose 1.5% at the opening of the market in Frankfurt on Thursday.
Elliott called on Deutsche Telekom to abandon its wholly owned acquisition of T-Mobile US and instead use the funds for a more substantial share repurchase program to return value directly to shareholders.
Deutsche Telekom CEO Tim Hoettges has been advocating a full merger with T-Mobile US since April 2026. The German telecom conglomerate currently owns about 53% of the U.S. wireless carrier. If fully integrated, it will become the world's most valuable wireless carrier.
Before Elliott stepped in, the proposed deal had shown signs of trouble. According to a report released by Semafor in late July, T-Mobile US management informed Deutsche Telekom that they no longer supported the approximately $300 billion merger transaction, citing shareholder concerns and regulatory obstacles.
U.S. regulators are expected to force T-Mobile's earnings to remain in the United States as a prerequisite for approving the deal, which would weaken many of the strategic reasons behind the deal.
Elliott deals with strategic uncertainty
JPMorgan equity analyst Akhil Dattani pointed out that mere rumors of activist investors stepping in are enough to drive stock price volatility. He believes Deutsche Telekom is severely undervalued given its double-digit earnings per share growth, but is dragged down by what he calls a "unique strategic overhang portfolio."
Dattani explained: "Radicalism may force Deutsche Telekom to resolve the dispute by either admitting its interest in a merger and then elaborating the logic of the transaction, or formally excluding the transaction." He maintains an "overallocation" rating on the stock.
Deutsche Telekom has previously announced plans to repurchase up to 5 billion euros (approximately US$5.8 billion) of shares in this fiscal year, accounting for about 4% of outstanding shares. Dattani suggested that while expanding this initiative would provide financial benefits, it would not independently resolve the strategic ambiguity that plagues stock prices.
Conditions for a full valuation recovery
Dattani said a full revaluation of Deutsche Telekom may require management to either abandon the T-Mobile deal entirely or provide the investment community with a compelling strategic case. The company also needs to address a unique set of U.S. -focused challenges, including emerging satellite-based competition, wireless industry trends, the relatively limited presence of optical fiber networks and the high timetable for upcoming spectrum license auctions.
In the past twelve months, Deutsche Telekom has fallen about 9% on the Frankfurt exchange, giving its market value to about 138 billion euros (about 160 billion US dollars).
Elliott has not publicly disclosed the exact size of its Deutsche Telekom position. German securities regulations require investors to file disclosure documents when their shareholding reaches or exceeds 3% of a company's outstanding shares. Such regulatory documents will represent preliminary official confirmation of Elliott's actual shareholding size.
