French carrier Iliad SA is still looking for a possible acquisition of T-Mobile US Inc. (TMUS) and is reportedly in talks with several potential partners to team up and make a better offer for the fourth largest telecom company in the U.S.
According to media reports, several financial and industrial companies have approached Iliad to improve its earlier offer for T-Mobile and negotiations in this regard are currently in progress. Notably, Iliad had earlier offered $15 billion in cash or $33 per share for a 56.6% stake in T-Mobile. Iliad’s earlier offer estimated $10 billion in annual synergies. However, T-Mobile’s parent company, Deutsche Telecom, rejected the offer citing it as too low.
The news about Iliad’s ongoing discussion with potential partners gathered momentum when Deutsche Telecom indicated that it is willing to negotiate an offer that values T-Mobile somewhere between $35 and $40 per share.
The attempts to gain control over T-Mobile have been doing the rounds for quite a while now. Recently, Sprint Corp. (S) scrapped its offer to buy stake in excess of 50% in T-Mobile from Deutsche Telecom for around $16 billion, over regulatory hurdles that ended months of negotiation between the two carriers.
Sprint’s backing out of the bid does not come as a surprise as initially in 2011, the Federal Communication Commission (FCC) had rejected AT&T Inc.’s (T) bid for T-Mobile US. In both cases, the FCC has raised its concern stating that a potential sale of T-Mobile will reduce the number of customer choices in the U.S. telecom industry.
Non-culmination of the Sprint deal removes a potential counter bid threat for Iliad. We believe that the French low cost operator might have to sweeten its bid by a few dollars per share as Sprint’s already rejected offer had valued the company at around $39 per share.
Of late, T-Mobile has been cutting tariff rates, scrapping roaming fees and investing in LTE contracts to tap customers from rivals. However the carrier still lags far behind big rivals like Verizon Communications Inc. (VZ) and AT&T.
Interestingly, Iliad plans to enhance T-Mobile’s operating margins from 20% to 30% but does not intend to raise its bid by more than €2 billion ($2.63 billion). It remains to be seen whether Iliad can bring about a change in T-Mobile’s performance through its low-priced mobile bundles.
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