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Deutsche Telekom Hints that Iliad's T-Mobile US Bid Falls Short

Tickers in this article: S TMUS

BERLIN (The Deal) -- Germany's Deutsche Telekom on Thursday obliquely confirmed that it had rejected an unsolicited takeover proposal for its T-Mobile US  unit from French cellular upstart Iliad but said it would be willing to consider viable approaches.

"We have always said that we would be open to offers for T-Mobile US that would improve its position and that of its shareholders. At the moment, we don't have an offer that fits those criteria," Deutsche Telekom CEO Tim Hottges said during an earnings conference call.

Hottges was reacting to a Wednesday decision by Sprint to end its talks with Deutsche Telekom about merging with T-Mobile US. Sprint had been expected to offer $40 per share for Deutsche Telekom's controlling T-Mobile stake -- which would value the company's entire equity at $32.3 billion -- but widespread reports said regulatory concerns killed the deal.

That left a $33 per-share offer from Iliad. However, analysts have questioned the logic of Iliad's bid since few synergies could be found in a linkup between a strictly French and a U.S. provider. Iliad's lack of international experience and ability to finance a deal were further causes for concern.

During the call, the CEO also lashed out at U.S. regulators who have been hesitant to allow T-Mobile, the country's smallest cellular company, to merge with a larger rival. Competition watchdogs are wary of deals that cut the market to three rivals from four.

In Europe, however, the four-to-three deals have become de rigueur with such mergers either completed or underway in Ireland, Germany and Austria.

"If they don't want consolidation, then regulators should help improve the position of minor providers," he said.

Still, a new offer may be around the corner.

Dish Network CEO Charlie Ergen Wednesday said he may be interested in bidding for T-Mobile and Iliad has indicated it might work with other financial or industry partners to bid for T-Mobile, with the possibility of a higher offer.

Iliad couldn't be reached for comment.

T-Mobile US shares closed down 8.4% on Wednesday at $31.06.

"Deutsche Telekom is under no pressure to get out of the U.S. market, especially since T-Mobile USA is currently growing well," wrote Warburg Research analyst Malte Rather in a note. He has a buy rating on Deutsche Telekom's stock.

Though Deutsche Telekom for years had been trying to unload T-Mobile US, the Bellevue, Wash. business's CEO John Legere has been turning the once-struggling company around since its merger with regional rival MetroPCS Communications. Low-price offers and network improvements have begun to bear fruit. In the last quarter, the company added 908,000 new customers.