Deutsche Telekom Slips as Bernstein Flags T-Mobile US Merger Risk and Cooling German Broadband

Bernstein cut Deutsche Telekom to Market-Perform from Outperform, lowering its price target to EUR 28.10 on T-Mobile US merger uncertainty and slower broadband growth.

Bernstein has turned more cautious on Deutsche Telekom, cutting its rating on the Bonn-based carrier from "Outperform" to "Market-Perform" and slashing its price target from EUR 37 to EUR 28.10. The downgrade, reported on Friday, reflects a pair of pressures weighing on the group: uncertainty over a potential full merger with its American subsidiary and a marked slowdown in its home broadband business.

The stock was trading at EUR 26.85 on the day, roughly 22 percent below its 52-week high of EUR 34.35. A separate quote put the shares at EUR 26.95.

A merger scenario that could dilute existing holders

At the heart of Bernstein's concern is speculation about a complete tie-up with T-Mobile US. If Deutsche Telekom were to buy out the remaining minority stake at a 20 percent premium, existing shareholders in the parent would face dilution of about 11 percent. Under that scenario, former T-Mobile US minority owners would end up holding roughly 42 percent of the combined group.

The numbers lay bare just how much the German parent depends on its US arm. Deutsche Telekom's stake in T-Mobile US accounts for about 64 percent of the Bonn company's entire market capitalization. Bernstein rates T-Mobile US itself at "Market-Perform" with a price target of USD 220, and the analysts' US team holds a neutral view of the business. Within the European telecom sector, the research house now favors Britain's BT over the German incumbent.

Broadband growth loses steam at home

Conditions in Germany are adding to the gloom. Deutsche Telekom faces noticeably tougher competition in the domestic fixed-line network, and Bernstein points out that revenue growth in the local broadband segment has lost considerable momentum. The growth rate stood at 4.5 percent in the second half of 2023 before falling to 1.7 percent in the first half of 2026.

Beyond the core tariff business, the company is pushing ahead with technical projects on the home front. At Audi's plant in Ingolstadt, Deutsche Telekom and software provider Unikie are testing autonomous vehicles, using a 5G campus network and edge-cloud systems to trial the self-driving loading of cars onto rail wagons. The carrier supplies the connectivity and digital infrastructure for the effort.

Buybacks and new services shore up the story

Management continues to lean on share repurchases to steady the stock. In the past trading week the company bought back 2,945,800 of its own shares, bringing the total under the current program to 14,005,765 since it began on August 10. The move is designed to tighten the supply of freely tradable stock and signal confidence to shareholders.

On the commercial side, Deutsche Telekom announced flexible shop formats to expand in-person advice, with exactly 50 such outlets planned across Germany by 2027. Its IoT unit broadened its multi-orbit roaming portfolio on September 17 by integrating Iridium's LEO satellite network, aiming to keep IoT devices connected worldwide around the clock. A global eSIM offering, "T-Travel," launched Monday with data packages in more than 200 destinations and works independently of a customer's existing mobile provider. The company also kicked off a campaign against online hate speech on Monday under the slogan "Was sich liebt, das neckt sich?", spread through television, cinema and social media.

Until the strategic direction of the US stake is settled, the upside for Deutsche Telekom's shares looks limited.