What’s up with... SoftBank & Deutsche Telekom, DT & BT, T-Mobile US

• SoftBank and Deutsche Telekom form a stock swap shop
• DT’s CEO hints at BT stake action
• T-Mobile faces lawsuits

There’s a news vortex swirling around Deutsche Telekom today as it strikes a partnership and stock swap deal with SoftBank, hints at a shift in its BT holding and then can only sit and watch as its US asset gets dragged towards the courts.

Japan’s SoftBank has signed a “strategic partnership” with Deutsche Telekom that will hand the German operator what it has been looking for – a larger stake in T-Mobile US. The nub of the deal is an equity share swap process whereby SoftBank will get 225 million “new” shares in Deutsche Telekom in exchange for 45 million T-Mobile US shares from SoftBank’s holding, a move that will raise DT’s stake in T-Mobile to 48.4% and take it closer to its stated corporate objective of owning a majority stake in the US operator. DT intends to acquire a further 20 million T-Mobile shares from the Japanese giant using a €2.4 billion chunk of the proceeds from the sale of its majority stake in T-Mobile Netherlands, a move that would give DT its majority holding and reduce SoftBank’s stake to 3.3%. SoftBank, which is as keen to diversify its European holdings as it is to get shot of most of its T-Mobile US assets, said once the share swap is completed it will hold a 4.5% stake in DT, making it the telco’s second-largest private shareholder: As a result, SoftBank wants a representative on the Deutsche Telekom board. SoftBank’s main aim is to provide the broad range of its portfolio companies with exposure to Deutsche Telekom’s customer base across Europe and, of course, in the US. “We are delighted to welcome SoftBank as a new key investor and strategic partner for Deutsche Telekom and can’t wait to get to work on the value creation opportunities from this cooperation for both SoftBank and Deutsche Telekom,” said DT CEO Tim Höttges (pictured above). 

DT is clearly today’s news lynchpin... CEO Höttges also announced today that the German operator is considering what to do with its 12% stake in BT and will make some kind of move during the next 12 months, reports Reuters. DT assumed the stake in BT in 2016 when the UK national operator acquired EE, which was owned by the German giant and Orange (which took a 4% stake): At that time, DT’s stake in BT was worth more than double what it is now. Speculation will now be rife that DT has its eyes on a bigger stake in BT, and may even swoop for majority control, so the sooner Höttges and his team make an announcement about their intentions the better.

But there’s further news today about T-Mobile US too... and it’s not good. Current and former subscribers have been signing up en masse to a series of class action lawsuits filed in district courts alleging negligence and failure to maintain “appropriate safety measures” in safeguarding customer data and personal information. So far three suits have been filed, with several more likely to follow. Each of those already submitted demand that the allegations should be heard in open court before a jury. If that happens it will be a long and incredibly expensive process for T-Mobile even before any financial penalties that might be imposed if the operator was found guilty. What’s more, further damage to the telco’s already tarnished reputation would be inevitable once the details of the lack of safeguarding of data becomes a matter of public knowledge. In August T-Mobile was forced to reveal that its systems had been hacked and the names, addresses, birthdates, social security numbers and driving licence details of about 54 million current and former subscribers had been illegally accessed. Two of the three plaints allege that T-Mobile is in breach of the US Federal Trade Commission Act, legislation that bans companies, including telcos, from involvement in “unfair or deceptive” activities. That provision includes the failure or inability to apply “appropriate security measures” to prevent unauthorised access to subscriber data and the personal, private information held on individual customers. One of the most telling points adduced so far is that 40 million of the individual accounts hacked had applied for credit and that fact alone would definitely mean T-Mobile could be sued for negligence directly under the terms of the FTC law. The FTC’s cybersecurity guideline stress that companies must not keep any “personally identifiable information for longer than is needed for authorisation of a transaction.” T-Mobile has certainly been doing that! Meanwhile, the third class-action suit comes under the California Consumer Privacy Act, which mandates specific exemplary penalties for organisations proven to have allowed (by negligence of otherwise) unauthorised access to client and customer data. The penalties are swingeing: US$100 to $750 PER CUSTOMER or actual damages incurred, whichever the higher. Do the arithmetic. It’s racing cert that the financial bods at T-Mobile are feeling queasy as a result. When he acknowledged the hack had taken place and the data stolen, the CEO of T-Mobile, Mike Sievert, claimed the breach was the work of a lone individual. Whether that is better or worse than a group of hackers slip-sliding their way into badly guarded databanks is a moot point. If it was either a one-man band or the orchestrated massed ranks of a gang of organised criminals is beside the point and T-Mobile top brass would be advised to stop offering lame excuses and start providing due recompense as quickly as possible.

Nokia has provided a data centre interconnect (DCI) system based on its 7750 Service Routers, 1830 Photonic Service Switches and network automation software to enable NorthC in The Netherlands to connect 10 regional data centres and, in effect, create one large virtual data centre. Read more.  

Virgin Media O2, which is scrambling to rebuild a positive image after a disastrous start to the week, says its Gigabit broadband access network is now within reach of 10 million UK homes and that, by the end of 2021, it will be able to offer Gigabit broadband “across its entire network of 15.5 million homes.” Read more. 

Multinational network operator Veon, which boasts 214 million customers across nine countries, has joined the growing list of operators offloading their mobile site infrastructure to raise funds and reduce their asset load by selling its 15,400 towers in Russia to neutral host company Service-Telecom for 70.65 billion roubles (US$970 million). VimpelCom, Veon’s Russian operator, will retain ownership of its rooftop towers and all the active network equipment currently housed on the masts it is selling, and will lease back the space it currently occupies on the sold towers as part of an agreement that runs for an initial eight years. Read more.   
 
Different operators are taking different approaches to the monetization of their tower assets. In Indonesia, Telkomsel has agreed to sell 4,000 towers for $435 million to Mitratel, a sister company within the broader Telkom Group that acts as an independent tower operations company. Telkomsel, which is owned by the Telkom Group (65%) and SingTel (35%), previously sold 6,050 towers to Mitratel, which now operates more than 28,000 towers. Read more.