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Must-know: Which companies could still acquire T-Mobile?

Phalguni Soni

Overview: Can T-Mobile and Iliad find the right wavelength? (Part 3 of 7)

(Continued from Part 2)

Which companies could still acquire T-Mobile?

T-Mobile is 67% owned by German telecom firm, Deutsche Telekom. In March, 2011, AT&T, the #2 U.S. operator had entered into a definitive agreement with Deutsche Telekom for purchasing its T-Mobile stake for $39 billion in a cash and stock deal. The combination of the #2 and #4 players would have created the largest telecom company in the U.S. The AT&T (T) bid was shot down in late 2011 by the industry regulator, the Federal Communication Commission (or FCC), on anti-competitive grounds.

SoftBank or Sprint

In December, 2013, reports surfaced that Japanese telecom giant SoftBank (SFTBF), which had already purchased an 80% stake in Sprint (S) last year, was considering a bid for T-Mobile through Sprint. You can read a detailed analysis in the Market Realist series, The latest word in telecom: Can SoftBank swing a T-Mobile deal?

Sprint was reportedly considering a bid of $40 per share or $32 billion. Recent reports on Bloomberg, Reuters, and other media sources suggest that SoftBank or Sprint have bowed out as well, also probably due to the likelihood that the FCC wouldn’t approve the deal.

Break-up fee

Due to the failure of the AT&T purchase to go through, the company was forced to shell out an estimated $4 billion to T-Mobile (TMUS) as the break-up fee. Sprint is also expected to pay a break-up fee reported at $1 billion by The Wall Street Journal and $2 billion by CNBC, to T-Mobile since the talks have been called off.

Why Softbank’s exit opened doors for other bidders

According to recent comments made by Dish Network Corp. (DISH) chairman Charlie Ergen, DISH may consider making an offer for T-Mobile if Sprint (S) was no longer interested. “Certainly to the extent that Sprint either dropped out or wasn’t interested or the government wouldn’t allow it, then T-Mobile is something that we would have an interest in,” he said, speaking at the company’s quarterly earnings conference call.

Although Dish is primarily a television network company, it also owns spectrum that it would either look to utilize for its TV distribution network through a wireless provider, or sell it to a wireless provider. Dish had tried to acquire Sprint last year, before finally bowing out to SoftBank (SFTBF). It had also tried to acquire another wireless provider Clearwire, in 2013, which was ultimately purchased by Sprint.

Iliad’s bid may set some important precedents

Although Iliad’s bid of $33 per share appears low by SoftBank or Sprint standards, the company may find favor with regulators. We’ll discuss why in the next section.

Continue to Part 4

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