Reuters: Iliad sets mid-October deadline to decide on T-Mobile bid

The logo of French low-cost telecoms provider Iliad is pictured during the company 2013 annual results presentation in Paris

According to an exclusive report from Reuters, the ambitious French telecoms company, Iliad is setting itself a mid-October deadline to decide whether it’s going to improve its initial bid for T-Mobile US, or walk away. And as we previously heard, even if it does improve the financial offering, it’s unlikely Deutsche Telekom will agree a deal with Iliad. It has no customer base, and no spectrum in the U.S., and so won’t be in a place to improve the company.

In the deal structure proposed by Iliad initially, Deutsche Telekom would keep a stake in the company, roughly 10%. But over the past months, it’s been reported that Iliad is in talks with several companies about raising finance to fund the deal. Companies like Microsoft and Google as well as private equity investors and banks have all been approached regarding financial support.

If successful, it’s thought that Iliad could offer between $35 and $40 per share for stake in T-mobile of between 60 and 90 percent. But that figure depends very much on how eager the private equity companies are to complete a deal with Iliad. Until they decide, Iliad can’t make a definite decision on the improved terms. It’s expected that a decision will be made in the second week of October.

As previously mentioned, other reports have claimed that T-Mobile is only interested in deals with companies that can improve it. Ideally, that would be with a company that has both customers and spectrum in the U.S. Given that desire, it’s difficult to see how Iliad can move ahead. It’s stretching to fund the deal as it is, it certainly won’t have the extra capital to invest in boatloads of spectrum. As a side note, it has been rumored that Dish could be interested in T-Mo, but is waiting until after the AWS-3 spectrum auction in November before making any decision.

What are your thoughts on this? Can T-Mobile survive and thrive without any consolidation? It’s certainly growing quickly, both in terms of coverage and customer base. Its income is growing each quarter. It’s seemingly going from strength to strength. What’s your ideal situation as a T-Mo fan?

Source: Reuters

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  • Adrayven

    Hope Iliad gets it.. why? because it’s unlikely to mean much, if any, changes and it takes T-mo off the buyout table and we can put this to rest..

    The other options; Sprint/Dish are horrible options and would end up killing Uncarrier most likely. Dish especially.. they love contracts.. they do the bait n’ switch 12 month price deal and 2 year contract to stick it too yeah…

    • dtam

      I hope Iliad doesn’t get it because they wouldn’t have much cash to invest into tmobile

      • Au contraire, by adding T-Mobile to its assets, Iliad would be able to raise a lot more capital on both sides of the pond to invest in both networks.

        • A Greenspan

          you’re high.

    • Trevnerdio

      They wouldn’t have the dough to keep on a lot of those employees, though. While there wouldn’t be any overlap like there would be if AT&T or Sprint bought it, they’d have to cut jobs that normally would have been kept.

    • Stefan Naumowicz

      Dish uses contracts because the cost of installing service is very high and they need some form of financial security that the customer will keep the service long enough for that startup cost to be a worthwhile investment. Since customers of T-Mobile are responsible for their own device (either purchasing outright or an EIP) there is no risk of them not utilizing a service contract, and therefore no reason that a new owner would feel inclined to bring contracts back.

  • trife

    Whoever eventually wins the TMO bid, I hope they realize their first order of business should be a complete revamp of their logistics/communications systems.

  • Jason

    If T-Mobile continues its’ rapid growth in customer base, it will eventually begin to see a profit. Which would make it viable without consolidation. The preference would be for it to be a standalone company with Legere still at the helm. If there is a group out there that can keep this train moving in the same direction, then I’m all for it. No mergers and no falling off the tracks.

    • Jay J. Blanco

      That’s why tmobile is pushing EIPS. That’s garenteed cash.

      • fentonr

        Cash, yes but its revenue with little to no profit. At least when I was a dealer a year and a half ago, it was rare that phones had a markup of more than 3-4%. After all, why should there be, Tmo wants phones to be cheap so you can buy lots of them. That means there is a profit of about $20 on a $600 phone. Sure, there are exceptions, some times its more, but on new phones, $20 is typical. Now if you put that phone on EIP, Tmo counts that revenue as it comes in, but they have to record it in present value, you can do a search for an annuity calculator yourself to check this but it comes out to be that a phone you will pay $600 for over 22 months is worth about $583 in revenue to Tmo. Once you take into account shipping and storage costs, its basically just revenue and no profits. Tmo likes EIP because people tend to upgrade more often and it makes them more likely to stay. Plus, before EIP they just took a bath on phone sales.

  • Fabian Cortez

    Ideal situation would be for DT to quit their intentions of offloading T-Mobile US and continue to invest.

    After the 600 MHz auction and buildout of said spectrum, DT’s investments will see fruition. The price wars will truly begin and customers will then leave the twin bells or they’ll (the twin bells) be forced to change.

  • donnybee

    Here’s what I don’t get about this report.. DT wants out. They want to sell their portion. They want the money. So why would they care if the buyer would be able to keep benefiting T-Mobile in the long run? If DT got what they really wanted from this deal, then it would be a break-away from the U.S. Market entirely. It seems to me that the report of them being picky of the buyer just conflicts their desire to leave and focus on the other worldly operations.

    • calvin200

      They want out!! DT would be stuck with shares in TMobile with a company that doesn’t have enough money to completly buy them out much less build out the network. TMobile needs a lot of money to have it’s own nationwide coverage.

    • Justin Merithew

      That’s how I’m seeing it too. The only carriers with spectrum and customers that are large enough to buy T-Mobile are AT&T, Sprint, and Verizon. AT&T was blocked, Sprint backed out, and Verizon would be blocked in the same way AT&T was. US Cellular and other carriers don’t have enough cash to pony up to buy T-Mobile. That leaves US companies who are currently not in the mobile game (like Dish) or foreign companies who are looking to step into the US (like Iliad). The best fit I could possibly see is Google, but I haven’t heard rumors about them wanting to start their own carrier in a while.

      • randian

        Google would have to worry about the other carriers blocking Android if they bought T-Mobile. Apple has the cash to buy T-Mobile too, and they would have the same potential issue.

        • Justin Merithew

          Google has actually considered their own service, Apple hasn’t. Discontinuing sales of the largest smartphone platform would hurt the other carriers more than Google. People who are attached to the platform would probably switch carriers when upgrade time rolled around, especially if Google agaggressively acquired spectrum.

      • maximus1901

        Debating this moronic requiremnt by DT is moronic: if someone offers enough cash for all their stake, they’d sell. Period.

    • fentonr

      But under the proposed they would retain a stake. The only thing I can think of is that because they would still own 10% they would want Tmo to continue to grow.

    • Mike

      DT wants something that will be easy to get shareholder approval. That means not only money, but at partner that has spectrum, customers, and the ability to add value to the shareholders.

      • Maximus

        Shareholders don’t approve the deal, the board of directors does. DT doesn’t really care about who buys them out. They are in it for the cash. TMO cares of course. Little is reported about the relationship between DT and TMO though. That is what I’m curious about. How do the two companies talk about these issues?

    • It’s very likely that such reports were planted by speculators or interested parties rather.

  • Thugnificent

    I wish I had 100 billion dollars, 5 Billion for me and my family and the rest to buy T mobile from Ze Germans and buy out the regional carriers and invest in the 600 mhz auction and then expand.

  • Jeff

    Hope Iliad gets it, look what they did in France with http://mobile.free.fr/ The phone Plan are beyond what we have here. $25 a month Unlimited Phone /Text/msg /mms
    Unlimited phone call on landline to more than 100 countries
    Internet 3G : 3Go / 3G + 4G : 20Go….

  • Rumors aside, because whether it’s the WSJ or Reuters reporting it’s still rumor, I think that DT will make a deal when a tall enough pile of greenbacks is put on the table.

    I’d much rather that a champion for the consumer like Iliad would take the baton from T-Mobile, instead of any consumer parasite company, especially from the cable industry.

    • maximus1901

      No. Illiad is gonna cut TMO retail presence in favor of French-style kiosks and self-service options.

      Also, give it a break with the childish “champions for the consumer” thing. TMO is doing what it needs to do to survive and thrive. Legere could just as easily be running att and Randall running TMO.

  • UMA_Fan

    The thing is once tmobile passes Sprint in amount of customers which they are right on the edge of their value will increase drastically.

  • Danny Wu

    If you’ve just started (last 30 days) or are getting T-Mobile service, you might want to do the refer-a-friend program.T-Mobile is now offering FREE unlimited LTE data for one year at the price of the cheapest Simple Choice Plan for both the referrer and the referee. Contact me at king_library@yahoo.c o m and so we can both benefit of this program!

    • Mike Palomba

      The free LTE is only for customers who joined in the past 30 days

      • Danny Wu

        You’re correct. Edited. Thanks!

    • ChitChatCat

      What does this have to do with this article?

  • D Velasquez

    no customer base here in the US? no problem , how about France Telecom and their Orange brand? what about Telefonica with their O2 brand? those are companies bigger in size than iliad!, even Telenor or Telia could buy TMO if they wanted to!, you see the problem is not the companies, the problem is that DT would love for a fast cash out option and TMO increasing it’s value is something would benefit DT if they decide to sell sooner or later. So yeah no problem with oversea carriers bidding…..is just that DT wants the secure and fastest way to the cash……and that is with a carrier or company with a customer base HERE In the states.

  • Nearmsp

    T-mobile is not going to get a deal where it gets customers and cash as well. That is a pipe dream. Legere used that line, until FCC made it very clear Sprint is wasting time. DT want their money and invest in Europe. Iliad offers them the best means to do so. The only other serious competitor for Iliad is Dish TV. DT should get Dish to make a competing offer. If Iliad walks away, Dish will buy T-mobile for a discount. Dish CEO is well known for picking up assets on the cheap. He is a patient man.

  • Maximus

    TMO should just buy themselves out. I really don’t think they need anybody. Sure, a buyer could give them more spectrum and customers but they are doing fine without all that. Reports that more consolidation needs to take place is just propaganda by the big companies.

  • chardog

    They want a 60-90% stake in TMO.. Unless they convince other stock holders to sell, not happening.. DT only owns around 70%(?) of TMO as is.. They’re going to have to hunt the hedge funds and other individual stock holders to get beyond DT’s share

    • Seth

      DT owns 2/3 of T-Mobile. So they could get to 66.7% just by buying DT’s shares. If they have the cash and want to go further; that wouldn’t be nearly as difficult as you make at sound. At this point $35 is almost a 21% premium over what the stock is trading at today.

  • Amanda Johnson

    They want to sell their portion. They want the money.

  • notyourbusiness

    What’s the point? Iliad already tried and failed. I don’t see this time being any different.