* Iliad bids $15 billion cash for 56.6 pct at $33 per share
* Deal to be financed with cash and equity; banks lined up
* Sets up potential bidding war with Sprint
* Iliad faces fewer antitrust issues than Sprint
(Adds challenges facing Iliad bid, background on Niel)
By Leila Abboud and Soyoung Kim
PARIS/NEW YORK, July 31 French
telecommunications company Iliad SA has made a surprise
offer for T-Mobile US Inc, setting up a potential
bidding war with Sprint Corp, the U.S. mobile carrier now
controlled by Japan's Softbank Corp.
Iliad, which has shaken up the French mobile and broadband
market in the past decade with its cheap, pared-down subscriber
plans, bid $15 billion in cash for 56.6 percent of T-Mobile US
at $33 per share, it said in a statement on Thursday.
The Paris-based company said its offer for the
fourth-largest U.S. carrier values all of T-Mobile at $36.20 per
share, a premium of 42 percent over the pre-announcement share
That is less than the roughly $40 per share Sprint agreed to
pay under the broad terms of an agreement worked out with
Deutsche Telekom AG, T-Mobile's majority owner. The
terms of that proposal, which followed months of talks and which
was reported by Reuters in early June, would value T-Mobile at
nearly $32 billion.
Deutsche Telekom and Sprint declined to comment, and a
representative for Softbank could not be reached.
Despite Iliad's lower offer, a person close to the French
company said founder Xavier Niel believes he has a strong card
to play because his bid would not face the antitrust scrutiny
that confronts Sprint in trying to merge the third and
fourth-biggest U.S. mobile operators.
"SoftBank has been told in many very clear coded words that
the Department of Justice and the FCC would probably not approve
the acquisition," said Reed Hundt, a former chairman of the U.S.
Federal Communications Commission. "There's no question to me
that the FCC would say 'bienvenue'" to the proposed Iliad deal.
The FCC and Department of Justice expressed a desire earlier
this year to have at least two more network operators competing
against AT&T and Verizon.
The T-Mobile offer is Niel's most audacious attempt at
extending his reach beyond France, Monaco and Israel, where he
owns part of operator Golan Telecom. Still, his bid to enter the
United States mobile market is a long shot, some investors and
The French company specializes in broadband and lacks
experience in mobile, T-Mobile's main business, having launched
its mobile service only in 2012. It is also unfamiliar with the
demands of competing in the United States, with its massive
coverage needs and deep-pocketed competition from AT&T Inc
and Verizon Communications Inc, the market leaders.
Iliad expects $10 billion in savings from the deal, although
it is unclear where they would come from because the company has
no U.S. operations.
The Iliad offer could falter on price alone, said Joseph
Mastrogiovanni and Michael Baresich, analysts at CreditSuisse.
"We are sceptical that T-Mobile and its shareholders,
including Deutsche Telekom, will find this bid attractive," they
wrote in a research note. "However, it could put pressure on
Sprint to move sooner rather later.
Few doubt the scale of Neil's ambitions. The entrepreneur,
an unknown outsider in France when he started out, has joined
the elite, lunching with ministers, starting a tech school, and
holding part ownership of the influential Le Monde newspaper.
He earned his first fortune from an adult chat and dating
service on the Minitel, a rudimentary computer network that
pre-dated the Internet in France. He then surfed on a wave of
market liberalisation in telecoms to create Iliad.
In many ways Niel is similar to Masayoshi Son, the head of
Softbank and his rival for T-Mobile US. Both have operated their
companies as challengers who cut prices and take on larger
rivals with bigger resources.
Niel sees the U.S. market as ripe for the kind of challenge
Iliad mounted in France, where its entry into the mobile market
in 2012 sent prices down 30 percent and hurt the profits of
bigger rivals Orange SA and SFR, as well as Bouygues
SA. He ranks 133rd on Forbes' list of billionaires,
with a net worth of $9.5 billion.
Son, who is also Sprint's chairman, has pledged to start a
price war in the United States, and he has said industry
consolidation would allow Sprint to compete more effectively
against Verizon and AT&T. He owns 19.3 percent of Softbank and
is 46th on the Forbes list, with a net worth of $18.4 billion.
T-Mobile would appear well-suited for the role of challenger
championed by Niel and Son. Last year, it turned around years of
subscriber losses using a strategy that eliminated contracts,
restructured plans and set off a race to slash prices across the
Earlier on Thursday, T-Mobile posted a net profit after a
year of losses, and reported the industry's largest post-paid
phone subscriber additions of the quarter.
T-Mobile Chief Executive Officer John Legere, known for his
outspoken and sometimes abrasive style, has come to define
T-Mobile's new audacity, epitomized by his frontal attacks on
competitors, offering to pay early termination fees for
customers who defect from rivals, for example.
"We know this is a scale industry. Scale brings advantage,"
T-Mobile Chief Financial Officer Braxton Carter told Reuters
earlier on Thursday.
"What we've seen so far is a glimpse of what real
competition in this industry looks like. If we could
turbo-charge it, it could be an incredible opportunity to bring
more competition to the market."
BIG BITE FOR ILIAD
Iliad said it would finance its offer, which was earlier
reported by the Wall Street Journal, through a mix of equity and
debt, and that it already had the backing of unnamed
Nevertheless, the deal would be a big bite for Iliad. Its
market capitalization of just above $16 billion compared with
about $25 billion for T-Mobile US.
T-Mobile owner Deustsche Telekom will now have the benefit
of two bidders.
A person at Deutsche Telekom familiar with the talks also
said a deal with Iliad had a certain appeal because of the lower
risk of being blocked by U.S. regulators.
Three years ago, regulators rejected AT&T's $39 billion bid
for T-Mobile US, which resulted in AT&T paying Deutsche Telekom,
T-Mobile's full owner, a reverse break-up fee of $6 billion in
cash and U.S. mobile assets.
T-Mobile shares closed up 6.5 percent at $32.94 on the New
York Stock Exchange. Sprint shares were down 5.3 percent at
(Reporting by Edwin Chan in San Francisco, Supantha Mukherjee
in Bangalore, Marina Lopes, Diane Bartz and Alina Selyukh in
Washington, Harro Ten Wolde and Peter Maushagen in Frankfurt;
Writing by Frank McGurty; Editing by Bernadette Baum, Greg
Mahlich, Tom Brown and Andre Grenon)