T-Mobile gets another bidder: France's Iliad

The French telecommunications company is making a play for T-Mobile, according to The Wall Street Journal.

t-mobilepressconferencespring2013-29.jpg
T-Mobile CEO John Legere. T-Mobile

T-Mobile has a suitor, and it's not Sprint.

French telecommunications provider Iliad has made an offer for a controlling stake in T-Mobile. The news was earlier reported by The Wall Street Journal. The move follows reports that Sprint and its parent, Japanese carrier SoftBank, were close to a deal to buy T-Mobile.

T-Mobile is a hot property thanks to its flamboyant Uncarrier campaign and the resulting turnaround in customer growth. The company posted second-quarter results earlier Thursday that included a new gain of 1.5 million customers and more than 900,000 branded postpaid subscribers. A second interested party may suggest a potential bidding war.

T-Mobile shares rose 5 percent to $32.45 on the news, valuing its market capitalization at just over $26 billion.

Iliad made an offer to T-Mobile's board less than a week ago, according to the WSJ. It's believed that Sprint has made an offer for $30 billion, the report said.

Iliad later issued a press release confirming its interest in T-Mobile, as well as its offer of $15 billion in cash for 56.6 percent of the company, representing $33 a share. It values the remaining 43.4 percent of T-Mobile US at $40.50 a share on the basis of $10 billion of merger cost benefits. It argues that by that measure, the overall value of the shares is $36.20.

T-Mobile confirmed that it received the proposal but declined to comment further.

Iliad said it would finance the deal through a combination of debt and equity, and that it has the support of "leading international banks" for the debt.

While T-Mobile is a publicly traded company, it is still majority owned by Deutsche Telekom, which has been eager to offload the asset to focus on its core business in Europe.

There have been a number of reports about SoftBank's efforts to buy T-Mobile and merge it with Sprint, although regulators have expressed their reservations about the deal. It's believed that a Sprint-T-Mobile deal has cooled as the two sides think through getting the regulatory hurdles.

T-Mobile CEO John Legere, not afraid to shoot his mouth off, was mum on today's earnings conference call when it came to a potential deal. He did acknowledge that T-Mobile would ultimately benefit from more scale, which could accelerate its ability to compete against AT&T and Verizon Wireless, which are two far larger companies.

A deal with Iliad would likely be easier to get through regulators because it doesn't involve the combination of two competitors, which has been a key hold-up with the government. Iliad is a French telecom company with its own history of implementing cut-throat rates, and sees it as an opportunity to enter the US market, according to the WSJ report.

But there was plenty of skepticism that the Iliad deal would derail a potential merger with Sprint, as concerns about the company's ability to obtain financing and SoftBank's deeper pockets would almost certainly win out.

"Iliad bid seems a bit of a stretch," said Credit Suisse analyst Joseph Mastrogiovani. He added that it could hasten Sprint and SoftBank's efforts.

Shares of Sprint fell more than 6 percent to $7.27 on the news. Sprint posted its own quarterly results on Wednesday, showing yet another quarter of subscriber losses. Some investors and Sprint's owner, SoftBank, hoped a combination with T-Mobile would speed up its own turnaround efforts.

Sprint declined to comment.

Updated at 10:12 a.m. and 12:17 p.m. PT: To include a statement from Iliad confirming the deal and an analyst comment.

About the author

Roger Cheng is the executive editor in charge of breaking news for CNET News. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade. He's a devoted Trojan alum and Los Angeles Lakers fan.

 

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