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As Sprint Withdraws from Bidding, Deutsche Telekom Continues Search for T-Mobile USA Buyer

T-Mobile store in the U.S.; a bid for the provider from French Iliad has been rejected. Source: AFP
T-Mobile store in the U.S.; a bid for the provider from French Iliad has been rejected.

The bid by French mobile phone firm Iliad for T-Mobile USA no longer faces competition from Sprint – but the firm’s initial offer has apparently been rejected by the United States operator.

Iliad, owned by French billionaire Xavier Niel, had offered $15 billion for a 56.6 percent share of T-Mobile USA.

The bid was followed by a counter offer from U.S. rival Sprint valuing the Deutsche Telekom‘s subsidiary at $32 billion. But Sprint has since withdrawn the bidding, citing concerns that a fusion would be rejected by the United States regulatory authorities, according to media reports.

T-Mobile USA has reportedly rejected the offer by the French firm, calling it too low.

“Iliad’s offer came unexpectedly at first. But Sprint has left the running, so now Iliad is the only candidate left so will be considered even more seriously,” Stéphane Piot, a Paris-based partner at telecoms, media and technology consultancy Analysys Mason, told Handelsblatt Global Edition.

Iliad is now reported to be considering its options after saying last week it would finance the sale through debt raised from banks and a capital increase. The French firm was not immediately available to comment whether it would raise its offer.

But Iliad’s chances of buying T-Mobile USA or a majority stake would increase if it teamed up with a U.S. firm, Piot said.

Sources say Iliad is searching for possible partners to increase its stake in T-Mobile USA. The news agency Reuters reported that Iliad is in talks with Dish, Cox Communications and Charter Communications about a joint bid. These satellite and cable operators are based in the United States and could support Iliad in providing services on the market as well as providing necessary capital.

However, the French provider would face several challenges, should the bid go ahead.

“The U.S. market is different from the French, obviously. It is hard to imagine copying one-on-one the French strategy and way of operating to the United States which has a very different telecoms market. With a U.S. partner the chance of success will increase,” Piot said.

If there was participation from a partner from the United States, it could appear as an even more serious offer. “The offer’s credibility would increase, and the bidding price might also rise,” said Piot.

“It will depend on the negotiations, the outcome of power struggles and the due diligence process.”

Stéphane Piot, Analyst Analysys Mason

“It will depend on the negotiations, the outcome of power struggles and the due diligence process,” Piot said about the price.

Deutsche Telekom’s share price fell following Sprint’s withdrawal from the running.

 

38477134 Xavier Niel DPA
Xavier Niel, the owner of Iliad, is considering his options. Source: DPA

 

Market observers say significant investment is needed in the networks, so a sale would come at a convenient time for the German owner.

It is the second time that Deutsche Telekom has tried to sell its subsidiary in the United States. In 2011, AT&T tried to buy T-Mobile USA. But the deal was blocked by the U.S. market regulators and Philipp Humm, the chief executive at the time, left the Deutsche Telekom subsidiary.

Meanwhile T-Mobile USA still needs to be sold due to its continued losses and limited capacities.

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