France’s Iliad makes a surprise bid for T-Mobile. Would it be a better fit?

3 Comments

No one saw this coming. France’s Iliad is making a $15 billion bid for T-Mobile US(s tmus), presenting a major threat to Sprint and Softbank’s plan to acquire T-Mobile(s s), which was thought to be only a press release away from becoming official.

Iliad is a broadband ISP but it also runs Free Mobile, a new mobile carrier shaking up the French mobile market. Free has been using Iliad’s extensive network of residential broadband Wi-Fi and new wireless technologies to undercut France’s three big incumbents. The ensuing price war has seen millions of customers migrate to Free Mobile’s subscriber rolls.

“The US mobile market is large and attractive. T-Mobile US has successfully established a disruptive position, which in many ways, is similar to the one Iliad has built in France,” Iliad officials said in a statement.

Source: Flickr / swruler9284

Source: Flickr / swruler9284

Iliad has offered $15 billion in cash for 56.6 percent of T-Mobile US, which values its shares at $33 apiece. Iliad said the deal would value the remaining 43.4 percent of the company at $40.50per share due to “$10 billion of synergies,” leading to an overall value of $36.20 per share. That would value T-Mobile at $29 billion. Meanwhile, the bid Sprint and SoftBank are rumored to be preparing would value T-Mo at $31 billion.

Iliad’s upstart mentality actually makes it a much more natural fit for T-Mobile. T-Mobile could easily continue its “Uncarrier” onslaught on the other U.S. operators, and even take some of its cues from Free Mobile. But such a deal would bring no operational advantages to the U.S. carrier, while a merged Sprint-T-Mobile would be instantly propelled to the top ranks of global carriers with more 100 million subscribers.

On the flip side, a T-Mo-Sprint combo would also kick off a long, grueling operational integration process as they swapped out networks and tried to integrate their separate customer bases. Sprint is a CDMA carrier and T-Mobile is a GSM carrier, and if history has proven anything, it’s that these kind of mobile mega-mergers — especially between carriers with different network technologies — produce far more stagnation than innovation when they’re first executed. Sprint to this day is still recovering from its long-ago acquisition of Nextel.

As the last several quarters have shown, T-Mobile has had no trouble growing on its own. T-Mobile’s future might actually become brighter under a foreign owner than as part of Sprint.

Though both T-Mobile and Free are the fourth largest carriers in their home markets, T-Mobile is actually much larger due to the respective size of their countries. According to the Wall Street Journal, T-Mobile has a market value of $24.8 billion, while Iliad is worth only $16 billion. Iliad, however, said it would finance the deal with a combination of debt and equity and has support of multiple banks.

3 Comments

Richard Bennett

Free Mobile has a 12% market share in France after two years, hardly disruptive. Their price is low, but so is their service quality, and they get by on “calling party pays” subsidies. More than a partner with a budget-minded mentality, TMob needs one with some wires and towers, which Free doesn’t have.

Kevin Fitchard

Hey Richard,

12 percent in 2 years seems like the definition of disruptive to me. Sprint and T-Mo have 15 percent market shares each and they’re long-time incumbents.

don

My MAIN concern is whether any of these plans to merge or be taken over by another company will result in better coverage. We have too many places where phone calls and texting and data are impossible due to a non-existent signal on 4G, 3G or G.

Neither ATT nor Verizon is an option for me because of their past behavior.

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