Deutsche Telekom unimpressed by Iliad bid for US mobile unit: sources

Mon Aug 4, 2014 3:09pm EDT
 
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By Harro Ten Wolde and Philipp Halstrick

FRANKFURT (Reuters) - Deutsche Telekom (DTEGn.DE: Quote) has serious doubts about the overall attractiveness of a bid by French telecom group Iliad (ILD.PA: Quote) 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 TMUS.N, the fourth-largest carrier in the United States, at $33 per share, crashing deal talks between Deutsche Telekom and Sprint (S.N: Quote) 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 person said.

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 skeptical that it would be able to cut out $10 billion in costs from the business as promised.   Continued...

 
The logo of French low-cost telecoms provider Iliad is pictured during the company 2013 annual results presentation in Paris March 10, 2014.    REUTERS/Jacky Naegelen