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Analyst: Not enough fat at T-Mobile for Iliad to cut

Posted: , by Alan F.

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Analyst: Not enough fat at T-Mobile for Iliad to cut
Deutsche Telekom has already rejected Iliad's offer to buy 56.6% of T-Mobile for $15 billion. The French telecom, known for being as much of an upstart in its country as T-Mobile is in the states, claims that buying the carrier would result in $10 billion in savings and an additional $2 billion in annual earnings before interest, taxes, depreciation, and amortization (EBITDA). Iliad expects to reach those targets by running T-Mobile as cheaply as possible.

The problem is that T-Mobile is already running very lean. According to Roger Entner, an analyst at Recon Analytics in Boston, T-Mobile's costs are "cut to the bone." Sprint, with a large overlap of towers and employees in the U.S., would have an easier time eliminating duplicate equipment and employees. With a higher amount of synergies available, Sprint has been rumored to have already agreed to buy T-Mobile in a deal that values the company at $32 billion.

Iliad might make more money per employee than T-Mobile, and might also have a higher profit margin. But T-Mobile has a high-speed LTE network that is the fastest in the states. Iliad uses roaming agreements with other carriers to fill out parts of its network. Certainly Iliad couldn't have really thought that Deutsche Telekom, which owns 67% of T-Mobile's shares, would have agreed to the deal.

"T-Mobile is not bloated at all. It is cut to the bone...T-Mobile already has a history of squeezing the vendors. But you can't squeeze water out of a stone. Iliad has a better chance of raising EBITDA by attracting more customers, than by cutting costs. Very few people have cut themselves to growth"-Roger Entner, analyst, Recon Analytics

Iliad now has two choices. It can be serious and raise its bid to a price that Deutsche Telekom's board would have to seriously consider, or it could slink away and let Sprint work on finalizing the offer it is expected to announce in September.

source: Reuters

14 Comments
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posted on 04 Aug 2014, 00:50

1. 0xFFFF (Posts: 2980; Member since: 16 Apr 2014)


T-Mobile needs to spend money and expand their network, not get cut to shreds by some army of French bean counters.

Iliad -- please go and buy some Greek telecoms. That should keep you busy for a while.

posted on 04 Aug 2014, 02:08

4. JC557 (Posts: 1059; Member since: 07 Dec 2011)


They do that and Iliad will find themselves treading water in no time. Given how both France and Greece operate though it would be quite a match...

I'm trying to figure what fat there is on T-Mobile in the first place. At this point all they can do is grow and both Sprint and Iliad (from the sounds of it) will only hinder that.

posted on 04 Aug 2014, 01:23

2. PapaSmurf (Posts: 8282; Member since: 14 May 2012)


The #1 game changer in the wireless industry.

posted on 04 Aug 2014, 01:31 2

3. joe1blue (Posts: 105; Member since: 25 Jul 2013)


F**K Sprint!

posted on 04 Aug 2014, 09:56

6. a_merryman (Posts: 675; Member since: 14 Dec 2011)


insightful

posted on 04 Aug 2014, 12:07 1

8. Doakie (Posts: 1251; Member since: 06 May 2009)


There's not much insight needing to be passed on. Sprint is a horribly run company and their network is a JOKE. This is coming from a 11 year Sprint customer. Sorry, truth hurts. The three major cities I've most recently been to Sprints network just had totally failed: Seattle, Honolulu, and Anaheim. All three locations Sprints network was totally unusable yet my T-Mobile work phone worked excellent, and it can't be argued is because Sprint has more customers on its network because T-Mobile has practically tied them in subscriber count.

posted on 04 Aug 2014, 12:49 1

9. a_merryman (Posts: 675; Member since: 14 Dec 2011)


Your post has nothing to do with the fact that the other guys post added nothing the conversation. I mean, you really reached in that so you could go off on your usual tirade about Sprint. Seriously, on every article about Sprint you have to complain and talk about your horrible personal experience with them. Guess what, it doesn't matter, it is anecdotal evidence that means jack.

I have sprint and have been more than happy with them in my area and where I have traveled. In fact I'm on a train from DC to SC right now and have no problems with data or coverage. And the friends I have convinced to switch over for the unlimited data are more than happy with their service too, especially since it has been getting better. But that doesn't matter either since it is also anecdotal evidence.

I mean, my god, it is like your one hobby and calling in life is to go around on here complaining about your experience on Sprint. Take up wood working or something, rebuild a car, build a gaming computer, go hiking.

posted on 04 Aug 2014, 14:22

10. ECPirate37 (Posts: 90; Member since: 14 Jul 2011)


I switched from Sprint to T-Mobile due to the free international roaming. I am VERY happy with the switch. T-Mo is SOOOO much faster in NYC than Sprint, and like you said about Seattle, SUPER FAST! 45Mbps. Even in the small town in NC that I'm from; I recently visited for the first time since switching, and there were a few dead spots, but a lot less than when I was on Sprint, and when I did have service (which was in town. I lost signal driving back country roads) it was roughly twice as fast as Sprint.

I would gladly tell people to leave Sprint for TMobile.

posted on 04 Aug 2014, 14:47 1

11. a_merryman (Posts: 675; Member since: 14 Dec 2011)


Hey, for my work phone I plan to get T-Mobile so I can use it for international roaming as well. I don\t dislike t-mobile. I'm just saying he is a one trick pony who whines like a child on every article. Spark is rolling out across the country and when fully built out over the next 2 years will make it hard for the other carriers to catch up on speed or capacity. Already have Spark in my town of DC, and you can get 60 mbps, not that I need anything close to that on a mobile connection for a phone.

posted on 07 Aug 2014, 08:40 1

13. ECPirate37 (Posts: 90; Member since: 14 Jul 2011)


Isn't international roaming the best thing ever? My friends complain about their high phone bill when they travel. By using Viber, Line, and Facebook phone; I paid exactly $0 more and was in Europe for a month.

posted on 07 Aug 2014, 10:55

14. a_merryman (Posts: 675; Member since: 14 Dec 2011)


Yeah, that's why I'm looking at them for my business line. And since I got the 1+1 I can just swap in a local sim if I need faster speeds or a local number. Since I'll be traveling overseas a lot the international roaming thing is a MASSIVE plus for me.

posted on 04 Aug 2014, 02:13

5. JC557 (Posts: 1059; Member since: 07 Dec 2011)


Maybe it's time for Elon Musk and John Legere to team up seeing as how both seem to be good at what they do.

posted on 04 Aug 2014, 09:59

7. Augustine (Posts: 714; Member since: 28 Sep 2013)


With an advisory board made up of executives from the likes of Verizon and AT&T, the analysis from Recon Analytics reek of partiality. So I'd be inclined to take their word in the opposite way: Iliad acquiring T-mobile would be the best thing ever to happen to the mobile market from the consumer's perspective.

posted on 04 Aug 2014, 21:38

12. johnbftl (Posts: 191; Member since: 09 Jun 2012)


The last report I read from June listed Verizon as the fastest network, not T-Mobile.

http://www.phonearena.com/news/Report-Verizon-takes-the-crown-as-the-fastest-wireless-network-in-the-U.S._id57066

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