Business | Telecoms

Iliad prepares to sharpen T-Mobile pitch

People close to the French telecoms group say its terms not communicated to Deutsche Telekom, which owns a controlling stake in T-Mobile

By Arash Massoudi, Daniel Thomas and Adam Thomson, Financial Times
Published: 13:54 August 7, 2014

London/Paris: France’s Iliad is preparing to step up its pitch for a $15 billion (Dh55 billion) takeover of T-Mobile US with fresh overtures to its largest shareholders that detail the financial merits of its $33 a share offer.

People close to the French telecoms group say its terms have not been fully communicated to Deutsche Telekom, which owns a controlling stake in T-Mobile, the fourth-largest US operator.

“The synergy potential of the offer is not understood and people need to look at Iliad’s model to understand the value from a combination,” said one person close to the situation. Iliad’s suggestion that it can extract $10 billion in synergies by cutting from T-Mobile’s $28 billion annual cost base by combining it with its French business was met with scepticism by analysts.

But the group controlled by Xavier Niel feels particularly buoyed by Sprint’s decision this week to back down in the race to acquire T-Mobile. For one thing, say people close to the situation, the antitrust difficulties associated with a Sprint/T-Mobile tie-up only highlight the lack of such problems for Iliad.

Second, Sprint’s withdrawal leaves Iliad in pole position as the only remaining bidder for the US mobile carrier. That, say the people, leaves Iliad confident as its campaign enters the next phase when it spells out how it can reach $10 billion in synergies.

Shares

One person added that Iliad would allow the “dust to settle” to see how Sprint’s withdrawal from talks with T-Mobile would affect its stock price. Shares in T-Mobile lost 8.4 per cent to $31.06 in New York.

People close to T-Mobile and Deutsche Telekom earlier this week indicated that the Iliad offer would not be acceptable as it undervalued the business. However, the withdrawal of Sprint has put the French group in a stronger position, according to analysts.

Those familiar with Deutsche Telekom’s thinking said that the group would consider the proposal, although they added it would be alongside alternatives for a business that the German telecoms company has no need to sell.

Deutsche Telekom is expected to reveal a healthy set of second-quarter results on Thursday, with the US providing improved contract subscriber additions and stronger revenues than analysts had expected given the success of its “uncarrier” low cost mobile offers.

The management is expected to focus on T-Mobile US success as a standalone company in the short and medium term, given the group is taking share from Sprint as well as AT&T.