Deutsche Telekom awaits a bid for T-Mobile that it can accept

Deutsche Telekom awaits a bid for T-Mobile that it can accept
Now that Sprint has pulled back from making a bid for T-Mobile, there could be a battle for control of the fourth largest carrier in the states. Upstart French telecom Iliad had offered $15 billion for 56.6% of the company, a surprising bid that came out of nowhere. Deutsche Telekom, which owns 67% of T-Mobile's shares, apparently feels that this offer is too low.

Deutsche Telekom CEO Timotheus Höttges, says that he is open to a bid for T-Mobile, but only if it adds value to the company. Iliad has been making noise about adding partners, giving it the financial wherewithal to raise its bid. One name bandied about is Dish Network. Dish Chairman Charles Ergen late last year, said that the company would be interested in T-Mobile if Sprint were to drop out of the bidding. Ergen's firm figures prominently as a possible partner in a consortium for the mobile operator, led by Iliad, or as a solo bidder for T-Mobile. Iliad has been called the "French T-Mobile," with its lower rates allowing it to pick up 12% of the wireless market in France.

Deutsche Telekom's Höttges is demanding some concessions from the FCC at upcoming spectrum auctions. With favorable low-frequency spectrum up for bids, the German telecom executive said that T-Mobile can't compete with "the big treasuries of AT&T and Verizon." But Höttges wouldn't mind if T-Mobile were no longer his headache. Selling its 67% stake in T-Mobile would give Deutsche Telekom billions of dollars to use to battle its rivals in the German cable industry.

Iliad's rejected offer valued T-Mobile at $33 a share. In NYSE action on Thursday, T-Mobile was trading at $29.85, down $1.20. Before Sprint decided to back off bidding for T-Mobile, the shares were trading above $34.

source: WSJ (SubscriptionReq'd)

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15 Comments

1. Planterz

Posts: 2120; Member since: Apr 30, 2012

I don't understand corporate finance or mufti-billion dollar international deals. Heck, I still don't understand wtf Winthorpe and Valentine did to the Duke brothers at the end of "Trading Places". But it seems to me that holding on to T-Mobile would be a good idea for DT.

8. Alan01

Posts: 570; Member since: Mar 21, 2012

In the movie, Winthorpe and Valentine stole a report on the Orange juice Crop that the Dukes were getting to see before others. The false report showed a shortage of oranges, so the Dukes started buying OJ futures in anticipation that the price would rise when the report came out. On the other side of the transactions, Winthorpe and Vallentine were selling the OJ contracts "short". That means that they sold it without owning them, in antricipation of a price drop. Of course, when the real report was issued, OJ futures dropped sharply making a fortune for Winthorpe and Valentine, and big losers of the Dukes. In real life, there is a limit to how much certain commodities can move in a single day, which was ignored for this scene. Alan F.

14. corporateJP

Posts: 2458; Member since: Nov 28, 2009

LOL, you guys. Trading Places is on my all-time Top 10 list. Such a great film....

12. DocOc

Posts: 143; Member since: Apr 23, 2014

It is a good idea for DT to hold on to TMO theoretically, but you have to understand that this is a fringe investment for DT. Their market is Germany and they have plenty to think about their. TMO is a not exactly profitable at the moment even though they are producing solid revenue. DT wants to concentrate on the market they are familiar with and not have to deal with all of the chaos that is happening in the U.S. cellular market.

2. bradley8795

Posts: 64; Member since: Nov 19, 2013

The problem DT has is that it is a low dollar low reward investment for them. They could put the money to much better use elsewhere. It's basically like saving money, would you rather have your money in a savings account making 0.01% interest or in a money market account making 12%. T-Mobile is the savings account that DT is trying to sell.

3. fanesxx

Posts: 74; Member since: May 19, 2011

they don't know what they have, isn't wireless the future ,this can turn into a cash cow

5. Augustine

Posts: 1043; Member since: Sep 28, 2013

Yeah, I was bewildered by this, that DT wants cash to invest in cable. I don't know about Europe, but the youth stateside is not signing up for cable. Although I'm no youth, I ditched cable over a couple of years ago and don't look back.

6. Jyakotu

Posts: 867; Member since: Dec 12, 2008

Cable isn't just television. Cable Internet is huge everywhere, so they probably want to invest in bringing faster speeds to their cable Internet service, which I assume they have. Also, despite what reports are saying, people are still signing up for cable TV packages.

9. leroy98

Posts: 13; Member since: Jun 29, 2014

Yup, they want to invest in bringing faster speeds. They also want to invest in other countries where T-Mobile is active. Such as United Kingdom and The Netherlands and Poland, Austria and more. In Germany they will now fiber everything. Deutsche Telekom wants speed at a limit of 200Mb/s and Full HD television and HD-Voice. T-Mobile Netherlands is now upgrading their network, everything will be replaced with Huawei SRAN. At the end of 2013 T-Mobile NL had no LTE. Now there are LTE speeds up to 150Mb/s and other carriers are rolling LTE-advanced out in NL and Germany. These are several reasons why it cost that much.

7. sputtle

Posts: 8; Member since: Jan 23, 2013

Even wireless internet still has to use cable. Wireless providers have coverage to 98% of the U.S. and every single wireless transmission has to go through a cable. Controlling the highest density lines is big business.

13. Jason78

Posts: 281; Member since: Apr 10, 2013

Wireless communications only travel a short distance wirelessly. Your phone connects to the cell phone tower wirelessly. Then the call travels over fiber optic cables to the tower closest to the person you are calling. Only the very ends of the call are wireless. Deutsche Telekom is also expanding into eastern and southern Europe. They own majority stakes in some companies and minority stakes in other companies. Deutsche Telekom wants to increase their ownership stake in these companies and they need the money they have investing in T-Mobile to do that.

4. Augustine

Posts: 1043; Member since: Sep 28, 2013

After waiting so long for an offer for T-Mobile that it can accept, it won't be long when DT will receive an offer it cannot refuse.

10. Slammer

Posts: 1515; Member since: Jun 03, 2010

---"Höttges wouldn't mind if T-Mobile were no longer his headache."--- The US wireless industry platform is so different than overseas. The two largest carriers have successfully gained the control and foothold needed to secure top positions leaving Tmobile and Sprint to beg for custody as viable competiton. Softbank found out the red tape and DT has been trying to unload TMO regardless of how well TMO appears to be doing. No matter who purchases TMO, the power has landed fully in the hands of AT&T and VZW. It will be a very tough climb. John B.

11. mike2959

Posts: 692; Member since: Oct 08, 2011

It's actually NO DIFFERENT than overseas. Every country has 2 big player's, heck some only have 1. We have have 4, plus about 6 regional, and a crap load of MVNO'S so the wireless industry isn't that bad here.

15. corporateJP

Posts: 2458; Member since: Nov 28, 2009

At the end of the day, regardless of how it seems, there's only really two solid carriers in the United States. The MVNO's and, in quite a few cases, even Sprint and T-Mobile are using the Big Two's networks. Sprint roams a boatload off of Verizon's network outside of Metropolis, U.S.A. as does T-Mobile off of AT&T (a bit less by the numbers on the last one, but it still occurs nonetheless). It's good for the fact you have full nationwide service now with all the carriers, but as a business model, it sucks for competition and pricing. Minutes are like water now, however, but data in itself is gold. If you live in the city and never leave, T-Mobile is boss-status. If you're rural, it's AT&T or Verizon depending on where you go. I get to make sense of this on a daily basis, it's my job by default....

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