* Iliad bid $15 bln for 56.6 pct of T-Mobile US at $33/share
* BNP, HSBC agree to lend up to $13 billion - sources
* Iliad shares fall as analysts question wisdom, cost of bid
* Shares in French rivals fall as consolidation hopes fade
* Sprint has head start, higher offer for T-Mobile
(Adds investor comments, updates shares)
By Leila Abboud and Arno Schuetze
PARIS/FRANKFURT, Aug 1 Telecoms group Iliad has
lined up BNP Paribas and HSBC to finance its bid for T-Mobile
US, people familiar with the matter said, as it pursues a deal
that could overturn expectations of industry consolidation in
both the United States and France.
Shares in Paris-based Iliad dropped as much as 13
percent on Friday, as analysts questioned the wisdom and cost of
its surprise $15 billion offer for 56.6 percent of T-Mobile US
, the No.4 U.S. mobile operator.
Shares in rival French companies Bouygues and
Orange also fell on speculation that Iliad's interest
in a U.S. deal meant it might not seek a tie-up at home that
could ease competition in a cut-throat market.
"The offer may even not be meant absolutely seriously," said
Frank Heise, fund manager at Metzler Asset Management and an
owner of Iliad shares. "Iliad wants to exert pressure on the
players in France. It wants to show Orange and Bouygues that it
can go it alone and does not necessarily need them."
In the United States, Iliad is also jeopardising an expected
consolidation and faces a potential bidding war for T-Mobile US
with No.3 operator Sprint, and its Japanese backer
Iliad, which is being advised by Lazard banker Vincent Le
Stradic on its offer, said on Thursday there could be no
certainty its bid for T-Mobile US, 66.7 percent owned by
Deutsche Telekom, would be accepted.
Sprint and Softbank have been in talks with T-Mobile for
months and agreed in June to a framework of a deal that values
the company at roughly $40 per share, sources earlier told
Iliad's offer represents a lower price of $33 per T-Mobile
share, and $36.20 if the buyer delivers on $10 billion of
promised costs savings it thinks it can generate from running
the carrier more efficiently.
But Iliad, which is majority owned by billionaire founder
Xavier Niel, believes its bid faces fewer antitrust issues than
Sprint's, so Niel thinks he has an advantage in the talks,
sources close to the matter said.
The Paris-based broadband and mobile provider said on
Thursday its bid would be financed in debt and equity.
HSBC and BNP have committed to lending up
to $13 billion to Iliad, said one person familiar with the
situation. HSBC is also acting as Iliad's adviser.
Niel would put in up to 1 billion euros of his own money,
said the person, and a share sale to raise up to 2 billion euros
would be done at the Iliad level.
Debt would be raised by Iliad, at the level of a 100 percent
owned holding company below Iliad, as well as by T-Mobile US.
"Debt will be raised at three levels overall. The deal will
stand or fall on the financing," said the person.
"Can Xavier Niel pull it together? It's a very large
leveraged deal. It has a lot of similarities to Numericable's
successful bid for SFR in France in terms of structure."
With many U.S.-based banks already conflicted given that
they have signed onto the Sprint-Softbank bid, their
international rivals HSBC and BNP embraced the chance to finance
the Iliad approach.
Five global banks - JPMorgan Chase & Co, Goldman Sachs
Group, Deutsche Bank AG, Bank of America Merrill Lynch and
Citigroup Inc - have agreed to finance Sprint's proposal to buy
T-Mobile, sources told Reuters in June.
In bidding for T-Mobile US, Iliad is taking aim at a target
much bigger than itself. Iliad's market capitalisation was just
above $16 billion before Friday's share drop, compared with
about $25 billion for T-Mobile US.
Iliad has 8.6 million mobile customers and 5.7 million in
broadband, and generated 2013 sales of 3.75 billion euros, or $5
billion. T-Mobile US has 50 million mobile customers and 2013
revenue of $24.4 billion
David Moss, head of European equities at F&C, who does not
own Iliad shares, cast doubt on Iliad's ability to win the deal.
"There are no synergies. They've come up with 10 billion but
we don't know where that's come from," he said. "Shocked,
surprised, bemused are the words that come to mind."
Metzler Asset Management's Heise was cautiously optimistic.
"Iliad has shown in France that it can roil a market with
its low cost base. But that may not work so fast and easily in
the U.S., where the market conventions are different: higher
average revenue per customer, different product packages, more
promotion expenses," he said.
THREAT TO CONSOLIDATION
Shares in rival French telecom companies fell on Friday as
investors eyed the implications of Iliad - potentially a
catalyst for consolidation among the four mobile players there -
looking elsewhere for growth, leaving the industry at home to
suffer continued erosion of margins and cut-throat competition.
France has been in the throes of a price war since 2012
sparked by Iliad's Free Mobile brand, which has sent prices down
Third-place mobile carrier Bouygues has become the main
target after losing out in a bidding war in April to buy bigger
rival SFR to cable group Numericable. Its
shares were down 4 percent. Former monopoly Orange's shares
were down 2 percent, while Iliad's stock had pared its losses by
1255 GMT to trade down 5 percent.
Iliad made an informal offer to buy Bouygues earlier this
year, and also took part in talks with Orange about a joint bid
for Bouygues, sources told Reuters. Bouygues rejected these
overtures on grounds the prices being floated were too low.
(1 US dollar = 0.7468 euro)
(Additional reporting by James Regan in Paris, Simon Jessop in
London, and Gwenaelle Barzic in Paris; Editing by Andrew Callus
and Mark Potter)