By Ruth Bender and Thomas Gryta
PARIS--Iliad SA has dropped plans to acquire a controlling stake
in T-Mobile US Inc., ending a four-month pursuit that would have
marked the French telecommunications company's entry into the North
American market.
Iliad said Monday its new bid of $33 a share for 67% of the
cellphone operator had failed to pique the interest of majority
owner Deutsche Telekom AG and some of T-Mobile's board members. The
French company's first offer of $33 a share for 56.6% of T-Mobile
had been rejected in the summer.
The $15 billion bid was seen as a bold move by Iliad founder and
largest shareholder, Xavier Niel, who has disrupted France's
telecom market by slashing prices. The French billionaire had said
he would rely on his low-cost savoir-faire to boost T-Mobile's
profitability.
As analysts questioned whether Iliad had the financial muscle to
pull off such a deal, the French company's stock kept sliding,
losing about 25% since Mr. Niel confirmed his interest for T-Mobile
in late July.
Investors welcomed the news on Tuesday, sending shares up more
than 12% to EUR175.05 ($223.2) shortly after markets opened. The
French company's shares traded around EUR206 before the plan was
reported.
Shares in France's other mobile operators also jumped as
investors saw potential for mergers in the domestic market.
"We view the announcement as positive as it raises the
possibility of French consolidation in the near-term," Goldman
Sachs analysts said in research note.
Iliad said on Monday it had secured support from banks and
private-equity funds to propose buying a larger stake in T-Mobile,
but that doesn't appear to have impressed Deutsche Telekom.
T-Mobile US declined to comment, and attempts to reach Deutsche
Telekom for comment were unsuccessful.
Iliad's departure could have ripple effects on both sides of the
Atlantic. In the U.S., it leaves T-Mobile, the smallest of the
nationwide carriers, without a potential merger partner after 10
months of expectations that a deal of some sort would emerge. Two
months ago, Sprint Corp. walked away from its plans to attempt a
merger of the two carriers amid strong objections from
regulators.
T-Mobile CEO John Legere has defended the company's stand-alone
prospects but also has declared openness to deals with partners
such as Sprint, pay-television companies and investors from
overseas.
Dish Network Corp., which lost out on a bid to acquire Sprint
last year, has publicly shown interest in T-Mobile but hasn't made
a bid.
The carrier spent years hemorrhaging subscribers before Mr.
Legere took the reins in 2012. It has added more than four million
of the industry's valuable postpaid customers since the beginning
of 2013.
Some on Wall Street question T-Mobile's ability to maintain its
growth trajectory when bigger companies like Verizon Communications
Inc. and AT&T Inc. have the advantage of deeper pockets to fund
expensive network investments. The carriers will need billions of
dollars to compete in crucial government spectrum auctions that
will help determine their ability to grow for years to come.
In France, Iliad's decision to abandon T-Mobile's pursuit could
spark a new round of domestic consolidation talks. Together with
Iliad, former monopoly Orange SA, Bouygues Telecom SA and Vivendi
SA's SFR, are caught in a price war that is eating into profit
margins and their capacity to roll out new, modern equipment.
The four companies--Vivendi is in the process of selling SFR to
Altice SA--have been exploring various ways to combine their
operations and reduce the number of mobile-phone operators down to
three. Iliad has in the past made an offer to buy Bouygues Telecom
but the two parties failed to agree on price, according to people
familiar with the matter.
David Gauthier-Villars contributed to this article.
Write to Ruth Bender at Ruth.Bender@wsj.com and Thomas Gryta at
thomas.gryta@wsj.com
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