"Who the heck is Iliad?" asked the U.S. version of PC Magazine, and indeed that question is probably still reverberating around a market that is wondering why the maverick billionaire owner of a French operator would want to spend billions of dollars on buying T-Mobile US.
Iliad, the company behind France's Free Mobile, confirmed on Thursday that it had submitted an indicative offer of $15 billion (€11 billion) to the T-Mobile US board. The company bid $33 a share for a 56.6 per cent stake in Deutsche Telekom-owned T-Mobile US, thereby also throwing down the gauntlet to Sprint and SoftBank, which are considering a purchase of the U.S. operator.
"It's surprising, that's for sure. Iliad has never communicated serious international expansion ambitions, not least to the U.S. [Founder Xavier] Niel was influential in the launch of Golan Telecom in Israel--another challenger in the same 'uncarrier' vein as T-Mobile US--but beyond that there has been no previous hint at this new direction," said Emma Mohr McClune, service director, global consumer services, at Current Analysis.
One thing is certain: after the French company made its bid, Iliad and its founder Xavier Niel have significantly raised their profile in this highly developed and fast-moving mobile phone market.
As reported by our sister publication FierceWireless after the news first broke, Iliad's bid appears to pre-empt Sprint's planned bid for T-Mobile US. Speculation has been building for months that Sprint and T-Mobile US will strike a deal; many of the pieces, including the purchase price and the breakup fee, are already reportedly in place.
Iliad's offer is certainly not favourable in purely financial terms: SoftBank CEO Masayoshi Son is reportedly working on an offer of about $40 a share for T-Mobile in a deal valued at about $32 billion. It's also widely speculated that Iliad's move could now force SoftBank to make an offer sooner than intended.
Some analysts say the Iliad offer has at least formed a clear floor for the stock, although they do not see it as a legitimate threat to Sprint, according to the Wall Street Journal.
Chris Nicoll, practice head at telecoms advisory firm Analysys Mason, said one challenge he sees with Iliad owning T-Mobile is that it does not fix the spectrum problem that T-Mobile faces in the U.S.
"It has the least spectrum position of any of the mobile operators with the least amount of prized <1GHz spectrum, no fixed network service to pull from, and a Wi-Fi network that seems to have all but disappeared," said Nicoll in comments emailed to FierceWireless:Europe.
A deal with Iliad would nonetheless be likely to face considerably less regulatory scrutiny compared to a Sprint deal, which would reduce the number of operators in this huge market from four to only three.
As Mohr McClune also notes, there are certain similarities between Iliad and T-Mobile US, which have both been disruptive forces in their respective markets. When Free Mobile launched its first low-cost mobile offers on the French market in January 2012, it sparked a price war that subsequently tore the market apart and saw the launch of competing offers from Orange, Bouygues Telecom and SFR.
What's more, SFR is now in the process of being sold to Numericable after a bitter takeover battle that saw Bouygues Group lose out to Numericable parent Altice. Further consolidation of the French mobile market had appeared to be on the cards, with Iliad understood to be keen on buying Bouygues, but talks reportedly floundered over price.
"There's no question that the [U.S.] tie-up would be good news for Iliad's French rivals. The prospect of having Niel distracted with a U.S. acquisition for a few months will certainly come as a welcome relief," said Mohr McClune.
Make no mistake, whatever his motives Xavier Niel is an opportunist who continues to surprise. "If the company has seen an opportunity to disrupt the U.S. market with T-Mobile, I'm afraid U.S. rivals have to steel themselves for the worst," added Mohr McClune.
Latest reports from Reuters say Iliad has lined up financing for the deal from BNP Paribas and HSBC.
Updated: France's Iliad makes $15B bid to purchase majority of T-Mobile US
T-Mobile's Legere: We don't need to make a deal to be successful
Orange CEO calls on rivals to drive consolidation in France
Report: Sprint, T-Mobile to form JV to bid in 600 MHz incentive auction
Report: SoftBank, DT reach 'basic agreement' on Sprint/T-Mobile merger