Deutsche Telekom offered no detailed plan of how it will bounce back from the collapse of its deal with AT&T (NYSE:T), only assuring investors on Tuesday it was working on a long-term plan for its subscale U.S. wireless unit.
AT&T said on Monday it had dropped its $39 billion bid for T-Mobile USA, bowing to fierce regulatory opposition and leaving both companies scrambling for alternatives.
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"In the long term, we need more spectrum and network capacity. We are working on that. But we will not speculate about any inorganic steps or deals," Deutsche Telekom Chief Executive Rene Obermann told reporters during a conference call.
Deutsche Telekom shares were down 1.4 percent at 8.77 euros at 1148 GMT, one of the biggest decliners in a 0.7 percent stronger blue-chip DAX index on investor concern the company is back at square one with its American problem child.
T-Mobile USA, a growth engine in its early days but now a run-down asset, is badly lacking in the spectrum it needs to build a network capable of handling the vast data volumes that U.S. consumers and businesses use on smartphones.
"For Deutsche Telekom, the collapse of the deal leaves it with one more subscriber-losing business as it confronts the fallout from Europe's debt crisis," Silvia Quandt analyst Jacques Abramowicz said.
Bleeding money and losing customers, T-Mobile USA ranks fourth among U.S. carriers behind AT&T, Verizon and Sprint.
Obermann bet all his chips on a deal with AT&T and, while Deutsche Telekom is walking away with a $6 billion breakup package, analysts said he has lost a lot of time and will now still have to either invest in the U.S. market or find a new way to exit the country.
Will Draper, head of telecoms research at investment bank Espirito Santo, said the only long-term solution he saw for T-Mobile now was a merger with Sprint.
"If Deutsche Telekom wants to be in the United States on a 10-year view, that's what it has to do. It needs a bit of surgery now," he said.
Adding to its woes, Deutsche Telekom missed out on spectrum sales in the United States while it was busy negotiating the T-Mobile mega-merger, leaving it even more vulnerable.
Wireless carriers like AT&T, Verizon Wireless and Vodafone Group Plc, have clamored for access to more airwaves to stave off a looming spectrum crunch that would mean clogged networks, more dropped calls and slower connection speeds for wireless customers.
As part of the breakup, Deutsche Telekom will receive mobile spectrum in cities such as Los Angeles, Dallas and Boston as well as about $3 billion in cash to be paid in the coming days.
And while that spectrum will go toward helping T-Mobile USA grow, it will not solve the problem.
"In the long term, we have disadvantages in scale and spectrum. In the coming months, we will think about how to have LTE (wireless network technology) offers despite scarce spectrum," Obermann said.
S&P analysts said they expect Deutsche Telekom to look for a network sharing agreements with other operators in the U.S. market, similar to the way it set up Everything Everywhere with France Telecom's Orange in Britain.
Analysts have said a collapse of the deal could also be a catalyst for the sale of its stake in Britain's biggest mobile company Everything Everywhere, unless it manages to clinch a deal with another U.S. operator, none of which are anywhere near as good a fit as AT&T.