French wireless carrier Iliad's $15 billion bid to buy T-Mobile wouldn't face as much scrutiny from US regulators as Sprint and Softbank's significantly more lucrative proposal to acquire the US' fourth largest wireless carrier -- on top of that, Iliad is gaining leverage with competitors back home in France.
French investors and market analysts have been hoping major wireless carriers in France's volatile mobile market would come to terms on a consolidation of some form, but Iliad's bid for T-Mobile has cast doubt on that hope.
While Iliad would be buying a company much larger than itself, there would still be four major wireless carriers in the US. If T-Mobile was purchased by Sprint, which was ranked third among US wireless carriers, there'd only be three major players in the US wireless market and a lot less competition.
Iliad's reputation as a renegade of sorts in France would also play a role in inspiring competition in the US' wireless market, much more so than the unification of two of the country's four largest carriers, according to Paul Gallant, a telecommunications analyst at Guggenheim Securities.
"Sprint/T-Mobile raises classic antitrust red flags," stated Gallant. "Iliad raises none and their history of disruption in France would probably be viewed positively by regulators."
Back home in France, Iliad's "disruptions" have entailed offering cut-rate calling plans that have forced its competitors' profits to slim as they tried to keep up. But Frank Heise, fund manager at Metzler Asset Management and Iliad investor, said he believes Iliad's tactics won't be quite as effective in the US.
"Iliad has shown in France that it can roil a market with its low cost base," said Heise. "But that may not work so fast and easily in the U.S., where the market conventions are different: higher average revenue per customer, different product packages, more promotion expenses."
Whether or not Iliad seriously wants to purchase T-Mobile, the presentation of its offer has shook the landscape of the wireless market back in France and caused the stocks of all of the industry's major carriers to take a hit. Iliad's shares dropped a bit due to investor pessimism over the company's ability to manage the acquisition of T-Mobile and the stock in the other carriers dropped as consolidation hopes waned -- however, T-Mobile's shares rose on word of the Iliad's offer.
Iliad attempted to buy France's third largest wireless carrier, both on its own and through a joint venture with a competitor. Publicly aspiring to purchase T-Mobile may give Iliad more leverage in consolidation talks back in France, but Iliad has made a case that it truly wants to purchase the US company.
"The U.S. mobile market is large and attractive," Iliad stated. "T-Mobile US has successfully established a disruptive position which, in many ways, is similar to the one Iliad has built in France."
