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, reports The Wall Street Journal.
Iliad said Monday its new bid of 33 dollars 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 dollars a share for 56.6% of T-Mobile had been rejected in the summer.
The 15 billion-dollar 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 175.05 euros (223.2 dollars) shortly after markets opened. The French company’s shares traded around 206 euros 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.
Read more of this report from The Wall Street Journal.