Last week, the race to acquire thriving U.S. service provider
heated up when French telecom company Iliad made a $15 billion
bid to buy a 56.6% stake. T-Mobile has become quite attractive in
recent years, following the fundamental advantages that the
acquisition created. So with foreign bidders now in play, is it
possible that T-Mobile could soon find itself under foreign rule?
In particular, might
Why does everyone want T-Mobile
It's ironic that T-Mobile has become so valuable in part because
of AT&T's failed acquisition a few years back to acquire the
company for $39 billion. Regulators rejected that deal. Among
their objections was that it would create an unfair advantage and
lead to job losses.
As a result, AT&T had to pay T-Mobile $3 billion in cash
as a breakup fee, and it also had to include spectrum that
T-Mobile valued at another $3 billion. Therefore, T-Mobile was
able to aggressively price its service plans with a large
security blanket of cash, along with a faster and more reliable
network thanks to the spectrum. The end result has been 1.3
million and 1.5 million net new customers added during the past
two quarters, respectively.
AT&T's out of the picture, but others step up
Now, AT&T is long gone from the T-Mobile sweepstakes, but
before the news regarding Iliad,
was believed to be the most likely suitor. Sprint has reportedly
lined up a $40 billion-plus financing package for T-Mobile,
although investors are wary of whether any deal it proposes will
face the same fate as AT&T's.
In particular, combining Sprint with T-Mobile would still
eliminate one of the four national carriers, which was a chief
complaint the FCC had with AT&T's bid. Already, the FCC has
been hesitant to give Sprint and T-Mobile its blessing, most
recently objecting to Sprint and T-Mobile's plans to jointly bid
for low-frequency spectrum at next year's massive auction. To no
one's surprise, the FCC said doing so could "suppress meaningful
competition," further adding to the notion that Sprint plus
T-Mobile equals unfair, in the eyes of the FCC.
In comes more foreign interest
All things considered, the Iliad bid may never materialize, and
T-Mobile may continue to operate as its own carrier, thus giving
Americans four providers to choose from. After all, it does
appear that the FCC is set on its policy that four equals more to
the U.S. consumer.
However, with T-Mobile growing in favor with consumers thanks
to its generous policies -- such as trade-ins and offers to pay
off mid-contract plans with competing carriers -- another
potentially larger foreign company might see it as a good
opportunity -- say, Vodafone.
Now, Vodafone is interesting because it previously owned
nearly half of
's wireless business, before selling it to Verizon for over $100
billion. While Vodafone used much of that capital to pay off
debt, it's worth noting that Vodafone's U.S. business was very
profitable. Hence, it seems the company could hedge its
divestment, offer more than Sprint, and, perhaps most
importantly, keep the number of U.S. carriers at four instead of
A little bonus for Vodafone
Not to mention that this move would give Vodafone a way to get
back at AT&T. Vodafone was largely considered an AT&T
acquisition target before the
deal went through. Many analysts thought
AT&T would broaden its brand globally by
, a company that also has substantial TV and Internet assets. As
a result, Vodafone traded higher in the months before AT&T's
announced deal to acquire DirecTV.
However, with no offer, Vodafone has struggled with weakness
in Italy, Spain, and South Africa, and its stock has
significantly underperformed other European telecoms. Therefore,
T-Mobile could be the pick-me-up that Vodafone needs, as it
certainly has the balance-sheet strength and cash to make such a
deal, meaning it would get to acquire the company that AT&T
made competitive after AT&T's decision to acquire DirecTV
instead of Vodafone.
It's an intriguing scenario, and with AT&T considering
T-Mobile a large enough threat to lower the cost of many of its
own service plans in recent months, we have to believe that a
T-Mobile/Vodafone outcome would be a nightmare for AT&T.
The bonus if T-Mobile were acquired by a diversified company such
as Vodafone would be the likelihood of fewer changes for
consumers, as Vodafone often lets acquired assets operate under
their original names while retaining management. After all, if
something's not broke, why fix it? Right now, T-Mobile has shown
the fastest subscriber growth and has a solid spectrum portfolio.
So if you're a large global telecom company seeking exposure to
the most developed market in the world, why not buy T-Mobile?
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