French connection? Iliad tables surprise USD15bn bid for 56.6% of T-Mobile US

1 Aug 2014

French telecoms firm Iliad has responded to widespread media speculation by confirming that it has made an indicative proposal to the board of directors of T-Mobile US, offering to buy a 56.6% stake in the cellco for USD33.0 per share, or USD15 billion in cash. Iliad has stated that it values the remaining 43.4% of T-Mobile US at USD40.5 per share, based on USD10 billion of expected synergies generated by the deal. This valuation represents an overall price of USD36.2 per share, a 42% premium on T-Mobile US’s 12 December 2013 closing share price of USD25.41; the following day rumours emerged regarding a potential combination between T-Mobile US and its larger rival Sprint Corp. Iliad notes that the offer has been unanimously approved by its board of directors, and has the full support of its founder and majority shareholder, French billionaire Xavier Niel.

T-Mobile US was created in 2013 through a combination of T-Mobile USA and MetroPCS Communications; Germany’s Deutsche Telekom (DT) currently owns 66.7% of T-Mobile, with the remainder either held by former MetroPCS shareholders or floated on the New York Stock Exchange (NYSE).

Since late-2013 rumours regarding a potential tie-up between T-Mobile US and Sprint Corp have been rife. Last month, the latter agreed to pay USD40 per share – or USD32 billion – for T-Mobile US, and while the German-backed firm’s management team are receptive to the deal, the merger is expected to prove less popular with US regulators. The Federal Communications Commission (FCC) and Department of Justice (DoJ) have already raised concerns about such a tie-up, suggesting that it could lead to higher prices for consumers. In December 2011, the FCC rejected AT&T’s long-running USD39 billion takeover bid for T-Mobile on similar grounds.

A deal between Iliad and T-Mobile is likely to prove far more popular with the FCC, although early indications suggest that the French telco will need to raise its bid to be taken seriously by DT. Iliad gatecrashed the French mobile market in January 2012 with its ultra-competitive Free Mobile unit, going on to build up a 13.6% market share by 31 March 2014. For his part, Iliad boss Xavier Niel broadened his horizons in April this year, paying EUR321.8 million (USD445 million) for a 55% stake in Monaco Telecom. While Monaco Telecom has partnerships with companies in a handful of disparate markets, the deal offered scant indication that Niel sought to spread his wings further afield, let alone enter the United States – arguably one of the most competitive telecoms markets in the world.

United States, Deutsche Telekom (DT), Free Mobile (Iliad), Iliad (Free), T-Mobile US