Market responds to Iliad’s T-Mobile buyout offer: TMUS value climbs, Sprint and Iliad values fall

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Watching how analysts and investors interpret certain events in the technology industry has the tendency to throw up some surprises, and often times almost makes for interesting reading. Yesterday, following reports that French Telecom giant, Iliad wants to buy T-Mobile, the news affected three service providers’ value.

In regards to T-Mobile (TMUS), it seems as though the extra interest in buying the company has inspired confidence in the brand as its share value rose 7.5% during midday trading yesterday. The same couldn’t be said of Sprint, or Iliad. The former dropped by about as much as T-Mo grew, while Iliad experienced its worse value drop since 2006. Iliad’s share price fell by around 13%.

As reported by Bloomberg:

“…the savings Iliad is projecting from the combination may be hard to achieve because the two carriers aren’t in the same country, said Nuno Matias, a Banco Espirito Santo SA analyst in Lisbon. An increase in Iliad’s debt is also a concern, he said. After today’s decline, Iliad’s market value is smaller than its bid for the T-Mobile stake.”

It’s rumoured that Deutsche Telekom has turned down Iliad’s offer as it’s deemed inferior and not competitive enough. The $33 per share offer by the French company is some distance from the $40 per share offer from SoftBank/Sprint.

Sprint’s shares fell 5% in response to the offer, perhaps indicating that investors aren’t as excited by the prospect of a Sprint without the possibility of joining with uber-competitive T-Mobile. If you’re in to watching the market, it could be worth keeping an eye on all three stock prices over the coming weeks as stories develop and more information is revealed.

Sources: Bloomberg, Market Watch

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  • S. Ali

    DT must be confident that the FCC will approve a deal, but given the market successes of TMO that doesn’t make sense. I can’t see the FCC approving unless one of them decides to purposely fail (perhaps that’s Sprints end-game)

    • donteatme

      But remember, the failure money from the att deal is what got T-Mobile back up and running in the first place. If this deal fails, T-Mobile gets more free billions.

      • Pezplayer

        Correct me if I’m wrong, but I thought the breakup fee from AT&T went to DT and none if it was invested into TMOUS. The saving grace for TMOUS was the roaming agreements that were gained with the breakup.

        • vrm

          none of it invested in t-mobile ? You should read annual report of DT or their CC transcript- they ARE investing in t-mobile. Maybe not as much as one would like but they are investing. And don’t forget, ALL of the cash that t-mobile is investing in capex (4-5 billion a year for several years now) is DT’s money because they OWN t-mobile.

        • Jay J. Blanco

          That’s what I telling people like 3 months ago. I read it in there Quarterly report. Thanks for sharing

        • donnybee

          He didn’t say they aren’t investing currently.. He said the breakup fee from the previous AT&T/T-Mobile merger went to DT. And that’s correct. They used a majority of that earnings to help their overseas operations. Most of the help T-Mobile got from the deal was the roaming agreements. In fact, T-Mobile share prices fell after the deal fell through, so it was in an even deeper rut.

          T-Mobile didn’t have much going for it, but it didn’t take money to turn it around.. It needed a management team that was willing to lose money in the short term to focus on the long term goal. Money isn’t the end-all turnaround for a company, it will always come down to what risks management is willing to take and who they want to target as the beneficiaries of their decisions. T-Mobile was in a perfect position to make that happen since DT really stopped caring about T-Mo and we had an avenue to make radical changes.

          What I’m saying is that that money went to DT. T-Mobile did this on their own.

        • MastarPete

          Might want to edit your post to clear up that it was DT’s share price that dropped when the ATT merger attempt failed since T-mobile US was still privately owned by DT.
          It wasn’t until the merger with MetroPCS that T-mobile US became publicly traded and had their own stock.

        • taron19119

          No dt took that money and invest it in t-mobile LTE

        • JaswinderSinghJammu

          Don’t forget spectrum gain as well

        • Troy

          I’m pretty sure this massive LTE upgrade wouldn’t be happening if it wasn’t from the billions DT got from the breakup with AT&T.

    • Mark

      Sprint needs to try to look as if it is competing if any deal between DT and Softbank will prevail. When TMOUS tried to look hopeless without a merger with AT&T, look what happened. Sprint cannot make this same mistake or regulators will deny the takeover/merger. Sprint needs to step up their game fast before it’s too late.

  • Jay Holm

    Good, the higher Tmo’s stock price is the more it will cost to buy the company, and therefore less likely it’ll get sold!

    • josephsinger

      You really think so? It will make it harder to finance, but if a company like Softbank or Illiad decides that they want the company bad enough they’ll find a way to pony up the money.

  • http://rosarynovice.stblogs.com/ Augustine

    I think that the offer by Iliad is fair if the regulatory hurdle is considered. Sprint’s offer may be more enticing, but it’s carries a higher risk of being blocked. Then DT ends up with nothing.

    • Troy

      If the T-mobile/Sprint deal gets blocked T-mobile will get money like they did from the AT&T failure.

      • donnybee

        Only this time it won’t be as high. And if you remember this from last round, the stock value of T-Mobile fell after the deal didn’t go through. We have to remember how the market works, and right now T-Mobile is floating a little bit because investors realize it could be bought, and they like that. Once something like that falls through, it can have adverse effects.

        The only difference is that last time T-Mobile had a hard time developing its own value because it was in the slumps. They have a great thing going and even if an offer isn’t made, the value will stabilize because investors will see good returns since T-Mobile is on the positive side of revenue growth now. But I believe strongly that if a deal was announced, and fell through, that T-Mobile would feel it.

      • http://rosarynovice.stblogs.com/ Augustine

        True enough. But it seems to me that DT does want to divest itself of TMUS, not only to set up ploys to get break-up fees.

      • Adrayven

        Don’t be blinded by the breakup fee.. It’s not the same FCC.. The FCC is run by the man who used to be CEO of the wireless and cable lobbyist arm. He’s going to be far more sympathetic to Sprint’s buyout than you think..

        He’ll put on a good show, token questions.. like he is with Verizon.. but it’s smoke and mirrors.. Within a month of being in FCC we saw the death of net neutrality.. He moved too quick, showed his stripes.. Now he’s more cautious.. but we’ll end up with him supporting it.

    • jacky

      if sprint get blocked by fcc t mobile gets 2 billion dollar break up fee.

      • josephsinger

        Even though to you and me $2b sounds like buckets of money, but when you’re dealing with a corporation that burns through cash fast it’s not all that much in the long run. I’m sure that the breakup fee that AT&T paid was a help but ultimately a couple billion dollars is sort of insignificant.

  • 21stNow

    I don’t think that the run up in the stock price was indicative of confidence in the brand but rather hope in the buyout. The run up stopped right around the $33/share price that was quoted. The same thing happened when AT&T announced plans to buy Leap Wireless. I doubt that anyone had confidence in Leap Wireless as a brand.

  • Jamie Yoak

    I do not think that a Sprint and T Mobile merger are possible. Tell me your thoughts, please.

    • Nick Gonzalez

      It is very possible unfortunately. I don’t like the idea of Sprint/T-Mobile merging, I think it is dumb especially because of the baggage Sprint is carrying and they both use different technologies (GSM to CDMA).
      But that’s my opinion.

      • Paul

        When the absorption of Metro PCS Magenta would already know how to change over the CDMA. Though, it would be most costly to do so than taking another company with GSM already.

        • josephsinger

          The shutdown of Metro’s CDMA network is already in progress.

      • z

        will people drop the CDMA and GSM argument?
        We are going all LTE and the two different techs are nothing to doing that!

        • Nick Gonzalez

          All going LTE? Not anytime soon, at least not on tmo. And how’s Sprints LTE roll out going? mmmkay

        • http://rosarynovice.stblogs.com/ Augustine

          LTE is not nationwide in either carrier, so 3G and even 2G are important fallback technologies, which are vastly differently implemented by CDMA and GSM. Both will still be around for a few years.

        • Jay Holm

          Actually, LTE is an evolution of GSM.

    • NinoBr0wn

      Of course it’s possible.

    • Jay Holm

      I agree! Not just not possible, but not likely! Hmm, I wonder how many former Sprint customers have moved to T-Mobile in just the past year. . .

    • redman12

      Sprint could be use as a paper weight. T-Mobile uncarrier moves are strong, I’d rather have them make progress by itself. They seem to be doing great.

  • VG

    I know this is off topic, but I read on PhoneDog that Windows Phone 8.1 is now available on AT&T Lumia 925 and 520. Any news on WP 8.1 for T-Mobile Lumia counterparts?

    • MuthaFuckinStephen

      Still waiting on my update for my T-Mobile lumia 925

    • josephsinger

      You really think this is off topic? I’m not sure why you feel that way.

  • josephsinger

    The thing that Illiad has going for it is that it will not be under the scrutiny that it’s trying to lessen the number of players in the US so there’s the federal oversight thing.