* Iliad offers $15 bln for 56.6 pct of T-Mo, or $33/share
* Sprint bid at $40/share seen as more attractive-sources
* Iliad regulatory edge not enough to abandon Sprint-sources
* DT will examine both offers-sources
By Harro Ten Wolde and Philipp Halstrick
FRANKFURT, Aug 4 Deutsche Telekom has
serious doubts about the overall attractiveness of a bid by
French telecom group Iliad for its U.S. mobile unit,
despite lower regulatory hurdles than a rival offer, said two
people close to the company.
Iliad made a surprise bid on Thursday for 56.6 percent of
T-Mobile US, the fourth-largest carrier in the United
States, at $33 per share, crashing deal talks between Deutsche
Telekom and Sprint that have been going since last year.
"This offer is not serious enough to walk away from
Sprint/Softbank," said one of the people.
"It is better to have a bird in the hand rather than two in
the bush, but the question is at what price? And this discount
compared to the Sprint/Softbank offer seems too high," the
Sprint Corp, the third-place U.S. mobile carrier, has been
planning an offer that values T-Mobile at roughly $40 per share,
sources earlier told Reuters, though that bid is likely to face
more regulatory challenges as it would whittle down the number
of big players in the market to three from four.
The German operator has been looking for a way to exit the
United States for more than three years because it sees
T-Mobile's fourth-place position behind Verizon, AT&T, and
Softbank's Sprint as limiting long-term profitability.
Although T-Mobile's aggressive challenger strategy has
helped it win customers in recent quarters, Deutsche Telekom
remains concerned that its lack of low-frequency spectrum and
fixed-line infrastructure hampers its ability to compete.
Both sources said Deutsche Telekom Chief Executive Tim
Hoettges does not see Iliad's bid as attractive because he is
sceptical that it would be able to cut out $10 billion in costs
from the business as promised.
Deutsche Telekom also doubts that T-Mobile under Iliad's
ownership could mount a serious challenge to leaders AT&T and
Verizon without additional spectrum and capital, said a third
person briefed on the company's thinking.
In contrast, the German group has argued publicly that a
tie-up with Sprint would create a number three player with large
spectrum holdings and the critical mass to compete more
Such considerations matter because Deutsche Telekom, which
owns 66.7 percent of T-Mobile, would retain a 29 percent stake
in T-Mobile if it sells to Iliad, and a holding of about 15
percent in a combined Sprint T-Mobile, sources earlier said.
Deutsche Telekom will nevertheless look at both offers, said
the two people.
SHAREHOLDERS WELCOME BID
Iliad has shaken up the French mobile and broadband market
in the past decade with its cheap, pared-down subscriber plans
and is now challenging Sprint, owned by Japan's Softbank Corp
, for T-Mobile US.
Sprint has lined up financing for its bid and reached an
agreement in June with Deutsche Telekom over a deal framework
and valuation, sources earlier told Reuters.
Regulatory challenges remain the biggest hurdle facing the
Sprint-T-Mobile deal since both the U.S. Federal Communications
Commission (FCC) and Department of Justice (DOJ) have expressed
a desire to have at least two more network operators competing
against the market leaders AT&T and Verizon.
Iliad would not face a long antitrust review since it does
not have U.S. holdings and the market would still have four main
players, posing less of a risk of price rises.
Some Deutsche Telekom shareholders welcomed Iliad's arrival
at the drawn-out T-Mobile talks.
"It is positive that more interest has emerged and Deutsche
Telekom won't have to sell T-Mobile US at any price," said one
top 10 shareholder.
A top 15 shareholder of Deutsche Telekom said the group
should seek the best sale price by talking to both sides.
"The $33 offer is very low compared to $40, with the only
justification that approval is much more likely," said the
shareholder. "DT should talk to let as many potential buyers as
possible compete on bidding.
"If Sprint wants exclusivity in the negotiations, then let
them pay up for it," said the shareholder, adding this could
come in the form of a higher break-up fee.
The two sides have already agreed that Sprint would pay
Deutsche Telekom a break-up fee of $2 billion if regulators
block the deal, sources told Reuters in June.
Iliad shares closed down 1 percent at 189.60 euros on Monday
after a 7 percent slide on Friday. Deutsche Telekom closed down
1.7 percent to 11.88 euros, while T-Mobile US shares were up 0.7
percent to $33.5 at 1847 GMT.
(Additional reporting by Soyoung Kim in New York, Arno Schuetze
in Frankfurt, and Leila Abboud in Paris; Writing by Leila
Abboud; Editing by David Clarke)