France's Iliad makes US$15 billion bid to take control of T-Mobile US

PARIS/NEW YORK (Reuters) - French telecoms company Iliad has made a surprise offer for T-Mobile US, setting up a potential bidding war with rival suitor Sprint Corp, the U.S. mobile firm now controlled by Japan's Softbank.

Iliad, which has shaken up the French mobile and broadband market in the past decade with its cheap, pared-down subscriber plans, has bid US$15 billion in cash for 56.6 percent of T-Mobile US at $33 per share. It said it valued the rest of T-Mobile, the fourth-largest U.S. carrier and 66.67 percent-owned by Deutsche Telekom, at US$40.50 per share, and expects US$10 billion of cost savings from the deal.

The move is the latest in founder Xavier Niel's audacious empire building in telecoms which now includes businesses in Israel, Monaco and France and in many ways makes him a similar figure to Masayoshi Son, the head of Softbank and now his rival suitor for T-Mobile US.

Both have operated their companies as challengers who cut prices and take on larger rivals with bigger resources. A person close to Iliad said that Mr Niel believed Iliad had a strong card to play because its bid would not face the antitrust scrutiny that confronts Sprint in trying to merge the third and fourth-biggest U.S. mobile network operators.

The U.S. Federal Communications Commission (FCC) and Department of Justice (DOJ) earlier this year already expressed a desire to have at least two more network operators competing against the market leaders AT&T and Verizon.

Mr Niel also sees the U.S. market as ripe for the kind of challenge that Iliad mounted in France where its entry to the mobile market in 2012 sent prices down by 30 per cent and hurt profits at bigger rivals Orange and SFR as well as Bouygues Telecom.

Iliad said its bid would be financed by a mix of equity and debt and already had the backing of unnamed international banks. Nevertheless the deal would be a big bite for Iliad: its market capitalisation of just above US$16 billion, compares to about US$25 billion for T-Mobile US.

"There can be no certainty that the Iliad offer will be accepted by the board of directors of T-Mobile US," the company said. The offer was earlier reported by the Wall Street Journal.

T-Mobile's owner Deustsche Telekom will now have the benefit of two interested bidders for its US operation. A person at Deutsche Telekom familiar with the talks also said a deal with Iliad had a certain appeal due to the reduced risk of it being blocked by U.S. regulators as compared with a sale to Sprint.

Three years ago regulators rejected AT&T's agreed US$39 billion bid for T-Mobile US, which resulted in AT&T paying Deutsche Telekom as T-Mobile's full owner a reverse break-up fee of US$6 billion in cash and U.S. mobile assets. A Deutsche Telekom spokesman declined to comment.

In the absence of an alternative SoftBank and Deutsche Telekom AG had already agreed to broad terms for a deal, under which Sprint would pay about US$40 per share, valuing T-Mobile at nearly US$32 billion, Reuters reported in early June. But earlier this week Reuters reported that this deal was not expected to be hatched before September. Iliad said its bid valued T-Mobile at $36.20 per share offer, for a premium of 42 percent over the pre-announcement share price.

"The opportunity for a transaction that brings capital and spectrum would be highly beneficial," T-Mobile Chief Executive John Legere said on CNBC earlier on Thursday. "The opportunity to bring Sprint and T-Mobile together is one. But there are many different ways to do this and we will consider all of them," he said.

T-Mobile shares were up 4.4 percent at $32.30 on the New York Stock Exchange. Sprint shares fell 6.6 percent to $7.25.