T-Mobile’s Future Up In The Air After French Telecom Company Iliad Withdraws Takeover Bid

Chuck Bednar for redOrbit.com – Your Universe Online
French telecom operator Iliad announced on Monday that it had abandoned its bid to purchase T-Mobile US, becoming the third bidder in three years to withdraw from negotiations after the latter firm’s parent company declined to consider a new and improved offer.
“The Iliad Group announces that it puts an end to its project of acquiring T-Mobile US, following exchanges with Deutsche Telekom and selected board members of T-Mobile US who have refused to entertain its new offer,” the low-cost mobile company founded by French billionaire Xavier Niel explained in a statement.
Iliad had been seeking to purchase a 56.6 percent stake in T-Mobile US, but according to Reuters, the company had set a mid-October deadline to decide whether or not to improve its initial $33 per share bid. Iliad said that it had formed a consortium with two private equity funds to improve its offer to $36 per share for 67 percent of the company.
At the time of Iliad’s initial offer, T-Mobile US was in the midst of merger talks with Sprint that would have created a competitive rival to the top two American telecom companies, Verizon Wireless and AT&T, explained David Gelles of the New York Times. Negotiations with Sprint ultimately fell through, and following Monday’s announcement, shares of the now suitor-less US telecom company dropped a reported 3.8 percent in trading.
Officials from Iliad said that the company “had the ambition to accelerate T-Mobile US’ transformation,” in part by saving the company over $2 billion in expenses annually. It added that their potential acquisition of the fourth-largest mobile company in America “would have created significant value for both Iliad’s and T-Mobile US’ shareholders.”
While Bloomberg Businessweek reporters Marie Mawad and Cornelius Rahn noted that “a US exit would have allowed Deutsche Telekom to focus on its European business,” sources familiar with the company’s operations told them that the board was divided as to whether or not the German carrier should “sell its only growing asset.”
Those individuals further told Mawad and Rahn that the company was likely to wait until after November 13’s frequency auction before deciding on T-Mobile’s future. With Iliad’s exit, Bloomberg noted that satellite TV provider DISH Network could emerge as a potential bidder, since the company is interested in expanding its wireless services.
DISH chairman Charlie Ergen “recently contacted Deutsche Telekom to say he is interested in a future acquisition of T-Mobile,” sources familiar with the matter told the news organization in early September. “Dish, the second-largest US satellite-TV provider, has told Deutsche Telekom that it may be interested in a deal after a November auction for US wireless airwaves is completed,” added Mawad and Rahn.
Furthermore, another source close to Deutsche Telekom management told Reuters that Iliad’s new offer would not have been a significant improvement over the previous proposal, and that it would not have made good business sense to leave T-Mobile’s parent company with a sizable stake of equity “exposed to a company they have serious doubts about.”
In August, the authors of a Strategy Analytics Wireless Operator Strategies (WOS) service report predicted that Iliad’s bid would ultimately fail, but noted that it should serve as a wake-up call for US mobile carriers. As Phil Kendall, executive director of WOS explained, a successful bid by the French firm would have forced US companies to place an increased emphasis on marketing strategy based on segmentation.
“Irrespective of T-Mobile’s ownership, this is a wake-up call for operators to get ahead of the game: differentiated products targeted at specific market needs by segment are the key to success when pricing, network quality and product features are all ultimately replicable,” he added.
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