Overview: Can T-Mobile and Iliad find the right wavelength? (Part 5 of 7)
Iliad’s potential T-Mobile takeover
The Federal Communications Commission (or FCC), the industry regulator, and the U.S. Justice Department have frowned on a proposed merger between the SoftBank-owned (SFTBF) Sprint and T-Mobile, citing anti-competitive concerns. The FCC has repeatedly maintained that it wouldn’t like to see the number of national-level players reduced to three, from four currently. A potential merger between SoftBank or Sprint and T-Mobile would do just that.
Recent FCC blog may have been the catalyst for calling off Sprint and T-Mobile deal
In an August 1 blog post on the FCC website titled “Empowering Small Businesses,” Wireless Telecommunications Bureau Chief, Roger Sherman, commented on why joint bidding among the largest telecom providers at spectrum auctions shouldn’t be encouraged.
“Our goal is to promote the participation of as many parties as possible in the auction. If two of the largest companies are able to bid as one combined entity in the auction, their combined resources may have the effect of suppressing meaningful competition. Therefore, the item tentatively concludes that joint bidding arrangements between nationwide providers should not be allowed. It also asks questions about such arrangements between providers of different sizes.”
The blog post shows that the FCC is unlikely to relent on its stance. This may have been one of the reasons why Sprint (S) reportedly called off talks with T-Mobile (TMUS).
Why the Iliad bid has a greater success probability
For this reason, overseas players like Iliad (ILD.PA) have an advantage over the entrenched players in the U.S. telecom market. Since they have no operations in the country, the FCC and the U.S. Justice Department can’t block the merger on anti-competitive grounds. Dish Network Corp. (DISH) has an even bigger advantage. Not only is it a domestic company, but its lines of business aren’t having significant overlap with the telecom sector.
Both Dish and Iliad would add more competition to the telecom market. They may even get away with lower bids for T-Mobile. Let’s see how valuations for T-Mobile stack up in the next section.
Browse this series on Market Realist:
- Part 1 - Must-know: Will Iliad be the Trojan horse for buying T-Mobile?
- Part 2 - Why companies are fixated on a T-Mobile acquisition
- Part 3 - Must-know: Which companies could still acquire T-Mobile?
- Mergers, Acquisitions & Takeovers