Coverage: T-Mobile still in play

It may have been a holiday in the U.S., but bankers across the globe were working to try to put together a deal for T-Mobile. Iliad is still circling the company and is looking for partners to help complete the purchase.

Bloomberg’s Manuel Baigorri, Marie Mawad and Jacqueline Simmons had these details about the potential purchase by Iliad:

Billionaire Xavier Niel’s Iliad SA (ILD) is talking to private-equity firms about teaming up to make an improved offer for Deutsche Telekom AG (DTE)’s T-Mobile US Inc. (TMUS) unit, according to people familiar with the matter.

Iliad’s discussions with potential partners may accelerate after Deutsche Telekom indicated it’s willing to negotiate a sale if a bid puts a valuation of at least $35 a share on the business, said the people, who asked not to be identified because the talks are private. The German company hasn’t received a new proposal and there’s no guarantee a higher offer will be made, they said.

Financial and industrial partners have approached Iliad about a joint offer for T-Mobile, Chief Financial Officer Thomas Reynaud said at a press conference in Paris today. Iliad has been talking to U.S. buyout firms as well as companies and sovereign-wealth funds, the people said.

Adam Thomson and Daniel Thomas wrote for the Financial Times that Deutsche Telekom has been trying to sell the business for three years:

Deutsche Telekom was in talks this year to sell a majority stake in T-Mobile US to Sprint for about $39 a share – the second time it has tried to sell the business in three years – and those familiar with the group’s thinking said that any new bid would have to be nearer to that valuation.

In a press conference, Mr Reynaud said: “There are some industrial partners, which have a more strategic interest, and others who know the US telecoms market very well and who are more financial in character.”

He also defended Iliad’s July 31 offer, describing it as “still valid and probably even more relevant than at the end of July” given that the recent decision by rival Sprint to go it alone in the US market had removed one potential counter bid.

Iliad, which has quickly gained market share in France thanks to its ultra low-cost mobile offers, said in July that its offer for T-Mobile was worth $36.20 a share when $10bn in resulting synergies were taken into consideration.

The Wall Street Journal story by Ruth Bender reported that the offer was probably even stronger after Sprint had to back out:

Meanwhile, longtime suitor Sprint Corp. yielded to regulatory pressure and abandoned its pursuit of T-Mobile US in August. Sprint is the No. 3 mobile operator in the U.S., after AT&T Inc. and Verizon Communications Inc.

For Sprint, getting its hands on T-Mobile US could have allowed it to create a stronger competitor to AT&T and Verizon.

For Iliad, known in France for sparking a price war in the mobile market, buying T-Mobile US would give access to one of the world’s largest telecom markets, where Iliad sees potential to win customers with cheaper offers.

“Our offer is probably even more pertinent today after Sprint pulled out of the race,” Iliad Chief Financial Officer Thomas Reynaud said at a news conference. “It could evolve, though,” he said, “not necessarily on the value, but on the percentage of the capital.”

Several companies interested in working with Iliad on a bid approached the French company in August and talks are continuing, Mr. Reynaud said. One arrangement under discussion would call for Iliad and a partner to make a bid for more than the 56% of T-Mobile US that Iliad previously offered to buy, he said.

Geoffrey Smith wrote for Fortune that cash could be an issue for Iliad even after finding partners for the T-Mobile bid:

Even if it can raise the acquisition price for T-Mobile, Iliad will still have to find another large chunk of money almost immediately to compete at the FCC’s upcoming auctions of new frequencies in the fall.

The FCC has set a total reserve price of over $10.5 billion for the frequencies and rejected a proposal by T-Mobile and others to effectively break the auction down into smaller lots. The auctions are due to take place in November.

Deutsche Telekom says it has a standalone-strategy to develop the brand itself in case it doesn’t get a good enough offer, but is understood to be reluctant to make big new investments in the T-Mobile U.S.

Iliad’s main business in France is the Free mobile network and internet provider, which Niel has built up from humble beginnings with a mixture of rock-bottom prices and savvy marketing. The company said its net profit there in the first half of the year fell 1.3% to €139.9 million despite a 10% rise in revenue to €2.02 billion.

T-Mobile may be in play, but there are still a lot of pieces that need to come together before a deal is complete. It will be interesting to see who comes forward to help with the financing.