Bernstein Research has adjusted its ratings on Deutsche Telekom AG and its U.S. telecom subsidiary T-Mobile US, reflecting heightened risks tied to a potential merger and shifting competitive dynamics in Europe’s broadband sector. The firm downgraded Deutsche Telekom from an ‘outperform’ to a ‘market-perform’ rating, slashing its price target from €37 to €28.10, while retaining an ‘outperform’ stance on BT Group, raising its price target to 235 pence from 230 pence and naming it the top pick among European telecom stocks.
The downgrade for Deutsche Telekom stems from three key concerns: uncertainty over a potential merger with T-Mobile US, intensifying competition in Germany’s fixed-line broadband market from rival fiber operators, and a neutral assessment of T-Mobile US’s long-term growth prospects. Bernstein’s U.S. team has also flagged risks to T-Mobile US, including the sustainability of its growth trajectory, the capital-intensive nature of its fiber expansion plans, exposure to fixed-wireless access, and potential vulnerabilities from expanding low-earth-orbit satellite broadband providers.
A hypothetical takeover of T-Mobile US by Deutsche Telekom would dilute the latter’s shareholders by about 11%, with former T-Mobile US shareholders owning roughly 42% of the combined entity. Deutsche Telekom’s existing stake in T-Mobile US represents approximately 64% of its market capitalization. Meanwhile, German broadband revenue growth for Deutsche Telekom slowed to 1.7% year-on-year in the first half of 2026, down from 4.5% in the second half of 2023.
In contrast, BT’s outlook has improved, with Bernstein citing structural shifts toward stabilization and cash-flow growth. The company’s portfolio has simplified, Openreach’s line losses have plateaued as competition from alternative fiber networks eases, and BT is nearing the end of its major fiber investment cycle, allowing capital expenditure to normalize.
Other European telecom stocks have also seen adjustments: Bernstein downgraded Tele2 AB from ‘outperform’ to ‘market-perform’ with a price target of 166 Swedish krona, while maintaining an ‘underperform’ rating for Telia and Elisa.
The changes reflect broader trends in the telecom sector, where mergers and acquisitions remain a focal point, and competition in broadband and wireless services continues to intensify.
