Who wins if Iliad buys T-Mobile?

The French carrier's surprise bid for the US underdog could cheer consumers and regulators

French carrier Iliad's surprise unsolicited bid for T-Mobile US may be good news for everyone but Sprint.

Iliad confirmed on Wednesday it has offered to buy a majority stake in the fourth-largest U.S. mobile operator in a deal that values the company at about US$30 billion. The news followed months of reports about an impending takeover deal with Sprint, the third-largest carrier, that's never quite materialized.

The Iliad bid may have been unexpected, but it's not likely to be unwelcome. U.S. regulators will see a potential deal that changes the ownership of T-Mobile without affecting the makeup of the domestic mobile market. Consumers would be looking at a scrappy U.S. carrier now owned by a French company that's specialized in undercutting bigger rivals in its own market. And Deutsche Telekom, the majority owners of T-Mobile, may have a bidding war on its hands.

As simply one foreign owner looking to buy out another, Iliad would face dramatically less government scrutiny than Sprint would as a domestic player asking to further consolidate the market, said analyst Roger Entner of Recon Analytics. If Sprint bought T-Mobile, the U.S. would lose one of the four competitors that now vie for customers, a prospect that some regulators have said they wouldn't welcome. An Iliad buyout would preserve the four-carrier market.

"It would probably be very easy to approve," Entner said. The only condition he sees in such a deal would be including someone on T-Mobile's board who's been approved by U.S. agencies, to safeguard national security, as was required when Japan's SoftBank bought Sprint last year.

Four competitors, especially with an underdog as aggressive as T-Mobile has been under CEO John Legere, could continue the battle for consumers that has led to several new types of plans and price points across the U.S. mobile industry over the past couple of years. Iliad is known for the same kind of disruption in French telecommunications, Entner said.

Deutsche Telekom, which has been looking to cash out of the U.S. for years now, may benefit most of all from the entry of a rival bidder.

The prospect of going up against a proposal with a much easier path to approval won't scare off SoftBank Chairman and CEO Masayoshi Son, who controls Sprint, Entner said. "Masa-san is not a guy who gives up. He's tenacious. He's pugnacious," he said.

Iliad said nothing about the status of its dealings with T-Mobile, only that it's presented the offer to the board. But assuming that Sprint's still trying to seal a deal with Deutsche Telekom as this goes on, the conversations may be about to change.

"The bargaining position of T-Mobile has become much, much stronger," Entner said.

Iliad's purchase price is in the same territory as what Sprint is likely to offer, both being around the low $30 billion range, Entner said. Those numbers actually might not change much, but based on the greater risk in a Sprint deal, T-Mobile could command a much bigger breakup fee in case the government nixes the buyout. All indications are that T-Mobile has been looking to collect about $2 billion from Sprint if things go awry, but that could easily double with a less risky option like Iliad's on the table, Entner said.

Though a $4 billion breakup fee may not sound like much compared to a $30 billion buyout, it was just such a payout that helped put T-Mobile where it is today. AT&T gave T-Mobile $3 billion cash, a seven-year roaming deal and a bundle of spectrum licenses after the U.S. Federal Communications Commission and Justice Department blocked its attempt to buy the smaller carrier in 2011. That windfall contributed to T-Mobile's rollout of LTE.

"T-Mobile financed its network buildout through the spectrum and the money it got from AT&T," Entner said. That LTE expansion was key to making the underdog more credible against its larger rivals, paving the way for the successful challenges it's mounted since then.

On Thursday, T-Mobile reported a net gain of more than 1 million customers for the fifth quarter in a row, just a day after Sprint reported losing another 220,000 subscribers. Another consolation prize might make T-Mobile stronger yet again.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags mobileMergers and acquisitionsbusiness issuessprintSoftbankT-Mobile USIliad

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Stephen Lawson

IDG News Service
Show Comments

Cool Tech

Breitling Superocean Heritage Chronographe 44

Learn more >

SanDisk MicroSDXC™ for Nintendo® Switch™

Learn more >

Toys for Boys

Family Friendly

Panasonic 4K UHD Blu-Ray Player and Full HD Recorder with Netflix - UBT1GL-K

Learn more >

Stocking Stuffer

Razer DeathAdder Expert Ergonomic Gaming Mouse

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?