NextFin News - Elliott Management has built a significant stake in Deutsche Telekom and is pressing the German telecoms group to abandon a potential full merger with T-Mobile US in favor of larger share buybacks, according to people familiar with the matter. The move puts the activist investor directly at odds with Deutsche Telekom chief executive Tim Höttges, who has pursued a combination that would create the world's largest wireless operator by market capitalization.
The confrontation crystallizes a question that has hung over Deutsche Telekom for years: is the group worth more as a simplified, US-centric telecoms giant, or as a cash-return story whose European operations are slowly being monetized and returned to shareholders? Elliott has picked a side.
The Activist Enters the Frame
The size of Elliott's holding has not been disclosed. Under German securities law, investors must file a notification once a direct stake reaches or exceeds 3 percent of a company's shares, so the exact scale of the position may surface in a regulatory filing. What is clear is the objective: Elliott wants management to pursue alternative routes to shareholder value, with buybacks identified as the preferred mechanism, rather than a cross-border tie-up that would rank among the largest public mergers ever attempted.
The timing hands Elliott a ready-made argument. Deutsche Telekom's Frankfurt-listed shares have fallen roughly 9 percent over the past 12 months, leaving the group with a market value of about €136 billion ($160 billion) as of early September 2026. That underperformance relative to broader European equity indices is the core of the activist's case: capital earmarked for an unwieldy transatlantic combination could be returned to shareholders more efficiently. The stock has traded in a wide range this year, from a low near €23.50 in late June to a February high above €34, and the recent drift has left it roughly 16 percent below that peak.
This is not Elliott's first intervention in telecoms. In 2018 and 2019, the firm took a $3.2 billion stake in AT&T and pushed for cost cuts, management changes, and board expertise, criticizing the company's acquisition of Time Warner and its DirecTV purchase. That campaign ultimately won Elliott a board seat before the firm later exited its AT&T position. The Deutsche Telekom episode signals that Elliott is again willing to target large, complex telecom groups where it sees a gap between the sum of the parts and the traded price.
What has changed since the AT&T campaign is the environment for activism itself. After several years in which rising equity valuations and abundant liquidity insulated management teams from shareholder pressure, tighter financing conditions and softer share prices have reopened the door for aggressive engagement. In 2026, Elliott and its activist peers have refocused on conglomerate discounts, capital-allocation inefficiencies, excess leverage, and underperforming boards — precisely the categories into which Deutsche Telekom falls.
Why the Merger Was Conceived — and Why It Is Stalling
Deutsche Telekom already owns about 53 percent of T-Mobile US, a stake it built gradually from roughly 43 percent after the 2020 Sprint merger through share purchases from SoftBank and buyback dynamics. The US unit has become the engine of the parent's valuation and earnings: it generated approximately $18 billion in adjusted free cash flow last year and paid more than $2 billion in dividends to Deutsche Telekom. In the second quarter of 2026 alone, T-Mobile US reported revenue of $22.79 billion, up 7.8 percent year over year, with earnings per share of $2.99 and net income of $3.24 billion. Core Adjusted EBITDA grew 12 percent to $9.54 billion, with margins of 50.2 percent of service revenue.
Höttges' plan, under discussion since at least April 2026, was to create a new holding company that would acquire the shares of both Deutsche Telekom and T-Mobile US, potentially listing the combined entity in the United States and a European exchange. The deal was valued at roughly $300 billion — estimates across reports range from about $267 billion to $400 billion — and would have created a transatlantic telecoms giant with more than 200 million mobile subscribers. At the upper end of those estimates, it would have dwarfed Paramount's roughly $110 billion acquisition of Warner Bros Discovery, which itself faced fierce regulatory and legal resistance earlier in 2026.
But the merger has run into resistance on two fronts. First, T-Mobile US executives told Deutsche Telekom in late July 2026 that they no longer support the transaction, citing shareholder concerns and potential regulatory headwinds. Non-controlling shareholders, including large institutional investors, argued that folding the US business entirely into its German parent would undervalue the American operation. Second, the Committee on Foreign Investment in the United States was expected to review the deal, with US authorities likely to require that T-Mobile's US revenue remain invested in the country — a condition that would have undercut much of Deutsche Telekom's strategic rationale for the combination.
The German state adds a third complication. The federal government and state lender KfW together hold roughly 28 percent of Deutsche Telekom, and their combined stake could be diluted in a merged group. Any transaction would need political support to proceed. Deutsche Telekom declined to comment on the merger discussions. T-Mobile US and the German government did not immediately respond to requests for comment.
What Elliott Is Really Arguing
Elliott's position rests on a simple arithmetic claim: Deutsche Telekom does not need a $300 billion merger to unlock value when its own balance sheet and cash generation can do the work. Buybacks reduce the share count, lift earnings per share, and — critically — do not require shareholder votes, CFIUS clearance, or German political blessing. They are also fast. A repurchase program can be announced and executed within a single fiscal year; a merger of this scale would take many months, possibly years, and could still collapse at the regulatory finish line.
Deutsche Telekom is already moving in that direction. On August 10, 2026, the company said it had increased the third tranche of its share repurchase program to as much as €3.985 billion from an original €560 million, with roughly 7.6 million shares bought back for about €203 million by early August. Elliott's argument is that this should be the main event, not a side activity while management chases a blockbuster deal.
There is also a valuation argument, and it is the sharper one. Deutsche Telekom trades at a discount to the implied value of its T-Mobile US holding. With T-Mobile US worth roughly $200 billion on its own and Deutsche Telekom owning 53 percent, the US stake alone is worth more than €100 billion — close to the group's entire market capitalization of €136 billion. In effect, the market is assigning less than €40 billion to Deutsche Telekom's European operations, its towers business, and its fiber network combined. For comparison, Deutsche Telekom's group free cash flow is expected to reach about €19.8 billion in 2026, and adjusted EBITDA after leases is guided to approximately €47.5 billion. A European-only multiple on that cash generation would, in normal markets, be worth far more than the residual the share price implies.
The comparison with US peers makes the discount starker. T-Mobile US trades at a forward price-to-earnings ratio in the high teens, supported by service-revenue growth above 10 percent and industry-leading free cash flow margins. Deutsche Telekom trades at a single-digit to low-double-digit earnings multiple, despite owning that very business at a controlling stake. Elliott's bet is that returning capital directly to shareholders forces management to confront that discount rather than paper over it with a complex restructuring.
The activist's European campaign is broadening in parallel. On September 1, 2026, reports indicated Elliott had also built a position in French industrial-gases group Air Liquide, pressing for margin improvements. Analysts at Bernstein described the dynamic in terms that map directly onto Bonn:
The involvement of an activist of Elliott's caliber increases the pressure on management to act, and a buyback announcement at the company's planned capital markets day in October could serve as a near-term catalyst for the stock.
A concrete capital-return commitment, delivered on a defined timetable, is the lever Elliott is most likely to pull first.
The Counter-Case: Why a Merger Still Makes Sense
The strongest argument against Elliott's position is that buybacks treat a symptom, not the disease. Deutsche Telekom's European operations face structurally lower growth and heavier regulation than the US wireless market. Returning cash to shareholders does nothing to fix that asymmetry; it merely shrinks the denominator. A full combination would give Deutsche Telekom's shareholders pure exposure to the higher-growth, higher-margin US business while simplifying a corporate structure that currently splits ownership across two continents and two currencies.
There is also a governance argument. Deutsche Telekom currently controls T-Mobile US with 53 percent of the equity but cannot fully consolidate the cash flows or direct all capital allocation. Minority shareholders of T-Mobile US capture a portion of the US business's value that never reaches Deutsche Telekom's holders. A merger would close that leak. The dividend stream — more than $2 billion a year — is only a partial monetization of the parent's claim on the US asset. Höttges has framed capital discipline as a core priority: after the group's sale of a majority stake in its GD Towers business, he said the transaction would allow Deutsche Telekom to "crystalize the value of our tower assets, thereby creating value for our shareholders." Elliott's argument is that the same logic should now apply to the group's largest asset — realize the value, return the cash, and stop chasing structural complexity.
And the timing objection cuts both ways. Yes, a merger is hard. But the obstacles Elliott cites — CFIUS review, minority shareholder approval, German political support — are negotiable if the price is right. T-Mobile US executives' opposition, reported in late July, reflects the conditions of that moment: a deal structured as a full absorption at a price minority holders found unattractive. A new holding-company structure, with a dual US-European listing and a tax-efficient domicile, could address many of those concerns. The reversal does not mean the idea is dead; it means the first version of it was.
Still, the burden has shifted. Deutsche Telekom must now demonstrate that a merger can clear hurdles that, so far, have only accumulated. If it cannot, Elliott's simpler alternative — return the cash — becomes the default path.
Cyclical Weakness or Structural Discount?
The central analytical question is whether Deutsche Telekom's share-price weakness is cyclical — a temporary trough that will revert as sentiment improves — or structural, reflecting a permanent re-rating of European telecoms relative to their American peers.
The evidence points to structural, with a cyclical overlay. European telecoms have traded at persistent discounts to US peers for more than a decade, driven by heavier spectrum costs, more aggressive regulation, and slower subscriber growth. That is a regime difference, not a cycle. Deutsche Telekom's European operations are unlikely to suddenly grow at T-Mobile US's pace simply because sentiment turns. On that reading, Elliott is right that a merger is not the only path — but also right that the European business may never command a US multiple on its own.
The cyclical component is real but smaller. Deutsche Telekom's stock fell sharply in April on the first reports of the merger talks, recovered into the summer on strong US subscriber data, and has drifted lower again as the deal stalled. That volatility is noise layered on top of the deeper valuation question. A buyback would cushion the cyclical swings — fewer shares outstanding means each euro of earnings supports a higher price — but it would not resolve the structural discount.
This distinction matters for the conclusion. If the problem is cyclical, patience and capital returns are the answer, and Elliott wins. If the problem is structural, only a fundamental change in the asset mix — a merger, a large divestiture, or a spin-off — can fix it, and Höttges is right to keep pushing. The most likely reality is both: buybacks can narrow the discount at the margin, but they cannot eliminate a gap that is rooted in geography and regulation.
What Comes Next
The immediate catalyst is a regulatory filing. If Elliott's stake is at or above 3 percent, German disclosure rules will force the number into the open, and the market will learn the size of the activist's wager. Beyond that, investors should watch three signals.
First, whether Deutsche Telekom announces an expanded buyback before it renews the merger push. A larger repurchase program would be a down payment on Elliott's demands and would likely be welcomed by the market. Second, whether T-Mobile US management softens its stance — the subsidiary's cooperation is indispensable to any deal. Third, whether the German government signals support or resistance; with a roughly 28 percent stake, Berlin is a veto player, not a bystander.
Short term, the stock is likely to remain range-bound as the market weighs the activist's demands against management's strategic preferences. Medium term, the direction depends on capital allocation: buybacks would support the share price mechanically, while a revived merger attempt would reintroduce deal risk and regulatory uncertainty. Long term, the structural question is whether Deutsche Telekom can close the valuation gap between its European operations and its US asset — and whether a merger is the only way to do it, or whether disciplined capital returns can get the job done.
The base case is a larger buyback program accompanied by continued, quieter exploration of a merger structure that minority shareholders and regulators could accept. The upside case is a full combination that clears CFIUS review and wins minority approval, creating the world's largest wireless operator. The downside case is a prolonged stalemate in which neither path is executed and the valuation discount persists.
Deutsche Telekom and T-Mobile US declined to comment. Elliott did not respond to requests for comment.
The real question is not whether a $300 billion merger would be impressive — it would. It is whether Deutsche Telekom needs one to prove its value, or whether the market has already answered that question by pricing the parent as little more than a holding company for its American subsidiary.
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