Deutsche Telekom Juggles European Cloud Triumph and Transatlantic Merger Ambitions as Stock Stalls

Deutsche Telekom's T-Systems wins VW cloud contract; parent pushes for full T-Mobile US control. Q1 revenue up 4.7%, stock flat. New German telecom law aids fiber expansion.

T-Systems has landed what is arguably the most consequential cloud contract in its history, taking over the entire cloud infrastructure build-out and operation for Volkswagen Group. The so-called Group Private Cloud 2.0 will span all brands and geographies, keeping data processing inside the European legal framework while centralizing applications. Ferri Abolhassan, the T-Systems chief, pitches the in-house "T Cloud Private" as a cost-effective alternative to the US hyperscalers, and VW is also gaining direct access to AI infrastructure through the "Industrial AI Cloud" housed in Munich.

Yet even as the Telekom subsidiary positions itself as Europe’s answer to American cloud dominance, the parent company is busy engineering a move in the opposite direction. Timotheus Höttges, according to the Wall Street Journal, is pushing hard for a full takeover of T-Mobile US — the unit that already contributes nearly two-thirds of group revenue. The CEO wants to erase the conglomerate discount weighing on the stock and build the world’s largest telecom operator. Bernstein analyst Ulrich Rathe warns of serious regulatory obstacles, not to mention the need to win over US minority shareholders and secure approval from the German state, which still holds around 28% of the company.

Away from the merger noise, the underlying business continues to fire on all cylinders. First-quarter 2026 revenue rose 4.7% to €29.9 billion, while adjusted net profit climbed 6.5%. The new AI data center in Munich, equipped with 10,000 Nvidia Blackwell GPUs, has already attracted big-name tenants including Siemens, SAP and the startup Perplexity. On the fibre front, over 30% of German households now use a Telekom fibre connection, and customer churn remains low at 4.3%.

Berlin is also lending a hand. The cabinet approved amendments to the telecoms law this week, designed to slash approval times for fibre and mobile network expansion. The Telekom aims to install 5.6 million fibre connections in 2026 alone, and the new law classifies such rollouts as projects of "overriding public interest" — giving them priority treatment at local authorities.

But none of this is translating into a rising share price. The stock has been stuck in a sideways grind, trading at around €28.16 in one session and slipping to €27.92 on a recent Friday — a 12-month decline of roughly 10%. The 50-day moving average sits at €28.63, while the 200-day line is at €29.00, underscoring a clear consolidation phase. The relative strength index of 45.9 signals no extreme on either side.

Management is countering the drift with share buybacks. In the first week of June alone, the group repurchased 1.58 million shares under a programme with a total envelope of €2 billion. At a price-to-earnings ratio of 13.5, the valuation looks temperate; the company has guided for a dividend of €1 per share for fiscal 2025.

Two near-term catalysts could break the stalemate. A final verdict on ver.di’s collective bargaining package is due on 19 June, locking in cost increases through to 2028. Separately, Germany’s constitutional court is hearing arguments on the abolition of the ancillary cost privilege, a change that could ripple through the Telekom’s TV and entertainment business. Until those uncertainties clear, the market appears content to wait — even as the group pushes a European cloud win and a transatlantic merger ambition in parallel.