French mobile carrier Iliad is considering boosting its initial $15 billion bid for T-Mobile and seeking a partner such as Google or Microsoft for support.
"The offer we made is still pertinent but it could evolve, not specifically in terms of valuation, but on the percent of the capital (that Iliad proposes to buy)," said Thomas Reynaud, chief financial officer at Iliad. "To ensure that these discussions go to term, we cannot tell you more about them this morning."
Iliad's original offer of $33 per share for 56.6 percent of T-Mobile was originally rejected by Deutsche Telekom, the current owner of T-Mobile, in early August. Despite this, while Deutsche Telekom makes around a third of its profits in the U.S., it has tried to sell T-Mobile twice since 2011. The most recent interested party was Soft Bank subsidiary Sprint.
Following the rejection of Iliad's first bid for T-Mobile Deutsche Telekom senior managers discussed the fact that between $35 and $40 per share would be a more appropriate valuation for T-Mobile.
Iliad's mobile carrier in France, Free Mobile, has managed to dramatically cut costs by running most of its traffic over a network of Wi-Fi hotspots. This has been very disruptive to the French mobile market.
While a similar Wi-Fi network is not yet in place in the U.S., T-Mobile has always been the most Wi-Fi friendly of the big four carriers. Because of this Google could be an ideal partner for Iliad. While Google itself does not own a very extensive Wi-Fi network, it is partners with companies that do.
According to Reynaud, any increase in capital to fund the T-Mobile bid would be limited to two billion euros.
Despite the rumors, a number of Iliad shareholders see the U.S. market as a risky one, and would prefer to move in the direction of consolidation in France.
"It's clear that Iliad prefers the U.S. option compared with going back to the table to negotiate to buy out Bouygues and consolidate France," said Stephane Beyazian, an analyst for Raymond James.
One thing is for sure however and that's that Sprint won't be back wooing T-Mobile anytime soon.
