Iliad confirms T-Mobile US bid

Iliad confirms T-Mobile US bid

01 AUG 2014

Ambitious French operator Iliad confirmed earlier reports that it is eyeing T-Mobile US, with an offer of $15 billion in cash for 56.6 per cent of the US number-four player.

In a statement, the company said: “The US mobile market is large and attractive. T-Mobile US has successfully established a disruptive position, which in many ways, is similar to the one Iliad has built in France”.

Iliad’s offer values T-Mobile US at $36.20 per share, a premium of 42 per cent over T-Mobile US’ ‘unaffected’ share price of $25.40.

While the initial news of Iliad’s interest led to comment on the relative sizes of the two companies – with the French player being significantly smaller – Iliad said it would finance the deal through a combination of debt and equity, and that it “has support of leading international banks for acquisition debt”.

“In contemplating a possible transaction with T-Mobile US, Iliad will ensure strict financial discipline and value creation for all Iliad shareholders,” it said.

James Allison, senior analyst – operators, at IHS, warned: “We are concerned over Iliad’s ability to make the required investments in branding and networking to succeed in the USA.”

And, playing to what is one of the strengths of the combination, the French company said that the deal “should not raise any antitrust issues in light of the competition rules given that Iliad is not present in the United States”.

Ian Fogg, senior director for mobile and telecoms at IHS, noted that Iliad’s strategy for the French market – cross-selling fixed and mobile services —  would not be applicable in the US market, meaning it will “need to take a different tactical approach”.

“As a part of a US mobile market entry strategy, we believe Iliad should explore partnerships with fixed operators to strengthen its overall US market position and complement a mobile operator business,” Fogg said.

So far, neither T-Mobile US nor parent Deutsche Telekom have commented on the proposal.

Also tight-lipped have been Sprint and parent SoftBank, which are widely believed to be eyeing a tie-up with T-Mobile US, but a deal has never officially been confirmed.

An alliance between these companies would have to overcome a number of regulatory hurdles, primarily related to the combination of two existing US operators – and the potential removal of the most aggressive player in the country from the market.

SoftBank is no stranger to struggles to get its way in the US market. The company faced a counter-offer from US satellite broadcaster Dish Network when attempting to land Sprint, which also questioned the ownership of a US operator by an overseas player.

But with the company having already beaten a domestic rival with greater synergies to Sprint, SoftBank clearly knows how to play the game – although the competition issues of combining two major players in the market may still prove too much.

With the T-Mobile/Sprint alliance seen as something of a foregone conclusion, the arrival of Iliad into the market could open the way for other players to take a look at T-Mobile US.

Dish would be the obvious candidate, having looked at the company previously.

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Steve Costello

Steve works across all of Mobile World Live’s channels and played a lead role in the launch and ongoing success of our apps and devices services. He has been a journalist...More

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