NEW YORK, N.Y. – T-Mobile US Inc., the most eligible company in the U.S. wireless industry, has another suitor on its hands. Upstart French telecom company Iliad SA on Thursday said it has offered $15 billion for a majority stake.
Iliad is injecting itself into the courtship of T-Mobile, the fourth-largest US cellphone carrier, and Sprint Corp., the No. 3. Sprint has reportedly been in talks with T-Mobile for months, but no deal has been announced. Analysts believe U.S. regulators are likely to block the T-Mobile/Sprint pairing due to concerns that it would reduce competition and thus raise prices for consumers.
Iliad is much smaller than T-Mobile US, and it doesn’t have the financial might to buy the whole company. It’s offering $15 billion in cash for 57 per cent of T-Mobile US, at $33 per share. That’s less than Sprint’s reported offer of around $40 per share.
Iliad, however, claims that the shares it doesn’t buy will be worth $40.50 each thanks to “synergies” between Iliad and T-Mobile, indicating that it thinks the combined business will be able to expand more rapidly or cut costs. However, cross-border deals in telecommunications rarely yield substantive synergies.
T-Mobile confirmed that it received Iliad’s proposal and said that it will have no further comment. Iliad said it did not have a response from T-Mobile’s board.
T-Mobile shares jumped $2.07, or 6.7 per cent, to $33.01 after Iliad’s announcement, indicating that investors believe there’s some chance of an improved offer, either from Iliad or Sprint. The stock started moving up before the announcement, as The Wall Street Journal reported some details of the offer.
T-Mobile US is controlled by Deutsche Telekom AG of Germany, which owns 67 per cent of the stock. A similar portion of Sprint’s stock is owned by Softbank Corp. of Japan.
Deutsche Telekom has tired of owning T-Mobile US. In 2011, it accepted a $39 billion offer from AT&T Inc., the No. 2 U.S. carrier. That deal was scotched by U.S. regulators.
Iliad noted that its offer would not raise the same antitrust concerns that come with a Sprint deal, and that Iliad and T-Mobile US are both industry mavericks. Under CEO John Legere, T-Mobile US has thrown out the standard two-year service contract and introduced new plans that allow for more frequent phone upgrades, a move quickly copied by the larger carriers. Iliad broke onto the French scene with the Freebox, a unit that combines Internet access, TV and phone service over broadband lines. In 2012, it started offering cellphone service as well.
Iliad has 5.7 million broadband subscribers and 8.6 million wireless subscribers.
Earlier Thursday, T-Mobile said its strong streak of customer recruitment continued in the second quarter, despite tough competition from AT&T, which has been cutting its prices. The Bellevue, Wash., company added 1.5 million devices to its network in the quarter, for a total of 50.5 million.
T-Mobile’s profitability was still weak, however. It posted net income of $391 million, or 48 cents per share, but that included a gain of $791 million from a spectrum deal with Verizon. T-Mobile has posted losses for the four previous quarters.
The company’s revenue was $7.2 billion, up 15 per cent from a year ago.