Deutsche Telekom: Merger Uncertainty Overwhelms AI Push and Solid Fundamentals

Shares tumble 5.7% in a week as WSJ report revives T-Mobile US merger speculation, though Q1 revenue grew 4.7% and dividend hiked 11%.

The German telecoms giant is caught in a tug-of-war between robust operational performance and investor anxiety over a potential full-scale merger with its US subsidiary. While T-Systems forges ahead with an artificial intelligence partnership and the group delivered a strong first quarter, the stock has tumbled to within striking distance of its 52-week low, weighed down by a Wall Street Journal report that revived merger speculation.

Shares closed on Friday at €26.72, marking a weekly decline of nearly 5.7% — the steepest weekly slide since Bloomberg first reported possible merger talks on April 22. The stock now sits just 2.8% above the 52-week trough of €25.99 and has shed over 22% from its all-time high reached in February. The relative strength index, at 33.3, is creeping into oversold territory, signalling that the selling pressure may be exhausting itself.

WSJ Report Triggers Sell-Off

The catalyst for the latest leg down was a Journal report that CEO Timotheus Höttges is exploring options to more deeply integrate T-Mobile US with the German parent company. T-Mobile US already contributes nearly two-thirds of group revenue and is the group’s real earnings engine. A full merger would formally cement that dominance — but the path is littered with obstacles.

Minority shareholders of T-Mobile US are reportedly wary of being exposed to the lower-margin international business. The German government, a significant shareholder through the finance ministry, has declined to comment beyond calling the report “speculation.” Regulatory reviews in both Germany and the United States would also be required. Höttges, for his part, reiterated at an analyst conference in May that the company does not comment on market rumours.

Operationally, the company has plenty of good news to counter the gloom. T-Systems, the B2B arm, launched a partnership with software provider SupplyOn to bring artificial intelligence into industrial supply chains, helping companies embed AI securely into their workflows. The move underscores Telekom’s transformation from a pure network operator to a comprehensive IT services provider.

Solid Q1, Dividend Hike, and Labour Peace

The first quarter of 2026 delivered net revenue of €29.9 billion, an organic increase of 4.7%, with T-Mobile US posting an 11.5% rise in service revenues to $18.9 billion. The dividend for 2025 was raised to €1.00 per share, an 11% increase year-on-year. For the current full year, management expects adjusted EBITDA to reach around €47.5 billion and free cash flow of €19.8 billion.

On the labour front, clarity has emerged. Verizon and Deutsche Telekom reached a collective bargaining agreement in the fourth round of negotiations covering roughly 60,000 employees. The deal runs for 33 months through the end of 2028, with total wage increases of about 8.5% according to the trade union ver.di. A final membership vote was scheduled for June 19, effectively removing a near-term source of uncertainty.

Technical Picture: Oversold but Not Out

Technically, the stock looks stretched. The RSI at 33.3 suggests it is approaching oversold levels. The 50-day moving average at €28.23 represents the next resistance to the upside. The support level at €25.99 remains critical — a break below that would likely trigger further selling. On the flip side, the strong fundamentals provide a foundation for a potential rebound.

The next major catalyst will be second-quarter results on August 6. Until then, the market’s focus will remain fixed on Berlin’s stance regarding the merger question — a variable that could push the stock in either direction. The gap between Telekom’s operational strength and its depressed valuation is widening, and investors are waiting to see which force ultimately prevails.