French telcoms giant Iliad bids for T-Mobile US, sparks bidding war with Sprint

French telcoms giant Iliad bids for T-Mobile US, sparks bidding war with Sprint

Summary: French telecoms firm Iliad makes an offer for the fourth largest phone giant in the U.S., which is estimated to be worth close to $25 billion.

TOPICS: Mobility
(Image: CNET/CBS Interactive)

A likely bid by Sprint to acquire T-Mobile US may be in jeopardy after French telecoms firm Iliad made an offer for the wireless giant.

The fourth-largest U.S. phone giant, which remains under the ownership of German parent company Deutsche Telekom, could skip across the border into French hands if the deal goes through.

Iliad's bid of €12 billion ($16 billion) fell significantly short of T-Mobile's current market value of $24.8 billion. But according to a source speaking to The Wall Street Journal, the company is seeking financial support from several banks.

In June, Sprint sent ripples through the US wireless industry by securing $40 billion in financing in efforts to buy out its smaller, but significantly better-positioned wireless carrier. If the merger takes place, aside from likely antitrust concerns, the combination would create a stronger entity perhaps able to compete with Verizon and AT&T, the largest carriers in the US.

That said, Iliad believes its bid for T-Mobile wouldn't ruffle the feathers of Washington DC-based regulators because the company does not have a presence in the US, according to another person speaking to the newspaper.

T-Mobile on Thursday said it topped 50 million subscribers in its fiscal second-quarter earnings. The company reported $391 million in profit, with earnings of $0.48 per share.

T-Mobile's stock ($TMUS) rocketed by more than 5.5 percent on the New York Stock Exchange following the news.

Screen Shot 2014-07-31 at 12.30.07 PM
(Image: Google Finance)

(via The Wall Street Journal)

Topic: Mobility

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1 comment
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  • clueless

    I'm completely clueless when it comes to mergers and acquisitions, but from a purely layman's, uninformed perspective, this deal puzzles me. From what I've read, Iliad is a much smaller company than T-mobile. So how does a much smaller company buy a bigger company? It takes out a huge loan. So once this deal is done, Deutsch Telecom ends up with a pile of cash, and T-mobile continues being the smallest of the four U.S. mobile carriers, with one big change: it now carries a huge load of debt. I don't see how this benefits anyone but Deutsch Telecom, and to a lesser extent AT&T and Verizon. Sprint is left out in the cold, its hopes of becoming a large enough player to effectively compete with its two big rivals dashed. Even if it had a chance to buy T-Mobile in the future it would have to swallow all that debt.

    That said, I'm not particularly thrilled by the idea of Sprint buying T-Mobile either. I'm with Cricket currently, but AT&T just bought Cricket and appears to be doing its best to drive me away. When they shutter Cricket's CDMA network in March, I'm going to have to buy a new phone and a new plan. That means I get to pay the same amount I'm paying now for half the data, no tethering, and no Muse music service. So I've been shopping around for alternatives, and am discovering that Sprint, which used to be a budget carrier, is now almost as expensive as AT&T and Verizon (once you add their $20.00 monthly tethering to your plan). Virgin has eliminated is monthly tethering options in favor of $5.00 daily tethering (which is effectively $150.00 a month just for tethering) and only T-Mobile has a truly less expensive plan (though with pretty poor coverage).

    So, honestly, from the perspective of the U.S. consumer, it's hard to wind up spending less than $150.00 a month for two lines if, like me, you need a tethering option. Only T-Mobile and AT&T's GOPhone fits the bill. (And honestly, what is AT&T doing with both GOPhone and Cricket? )