T-Mobile Is the Object of Telecom Veteran's Buyout Efforts: Report
Telecom veteran Sol Trujillo is looking for financing with which to purchase T-Mobile USA from parent company Deutsche Telecom, Bloomberg has reported.
Trujillo has so far had little luck convincing BlackStone Group or KKR & Co. to take the plunge. The private equity firms "reacted with skepticism to the proposal due to its size and cost of financing," according to the report, which cites an analyst estimate that T-Mobile may be worth approximately $30 billion, mostly thanks to its mobile spectrum.
Trujillo began his telecom career at AT&T, before moving into the CEO positions at U.S. West and later Paris-based Orange, which has 50 million subscribers across swaths of Europe, Africa and the Middle East.
The American businessman was most recently the CEO of Australian carrier Telstra. He resigned in 2009 after battling with the Australian government over telecom regulations. According to Leading Company, such battles led to Telstra being locked out of negotiations to build a National Broadband Network and analysts to arguing that Trujillo should have been sued by Telstra shareholders.
Trujillo's departure also made headlines for remarks he made on a radio program. He described Australia as being a bit "like stepping back in time" and said that he'd experienced racism there. When Trujillo-who is of Mexican heritage and wears a distinctive two-finger moustache-resigned from the position, Prime Minister Kevin Rudd remarked simply, "Adios." Trujillo and top executives were also often referred to as "the three amigos."
Deutsche Telekom "remains open to a whole or partial sale of its U.S. division and would use the money to invest in its European assets," Bloomberg reported. In 2011, Deutsche Telekom gamely backed AT&T's efforts to merge with T-Mobile-the only top-four U.S. carrier that doesn't offer an Apple iPhone. After those efforts failed, it was reported to be in talks with MetroPCS and also Sprint, looking for options to help make the carrier more viable.
T-Mobile's fortune's were ultimately aided by its efforts with AT&T, as the contract promised a consolation prize of spectrum and nearly $4 billion should the deal not receive U.S. government approval. T-Mobile immediately put both toward a "network modernization" effort that includes improvements to its voice and data services and the build-out of a 4G Long-Term Evolution (LTE) network, which will enable it to support an iPhone.
T-Mobile's modernization effort will "allow the operator to remain competitive with all other Tier 1 operators," Technology Business Research analyst Eric Costa wrote in an Aug. 9 research note. He added, however, that while other carriers have used the iPhone and LTE to attract new subscribers, T-Mobile will need them "as a defensive strategy to help retain subscribers already on its network."
Until these 2013 benefits arrive, Costa added, "there is no end in sight for [T-Mobile's subscriber losses]," as the carrier will also be left out of the next iPhone launch, rumored to be slated for September.
T-Mobile, which has often seemed an entity that Deutsche Telekom has little love for, recently also lost its CEO and remains on the lookout for a new one. Philipp Humm announced in June that he was leaving, and in October will take on a co-CEO position residing over Northern and Central Europe for Deutsche Telekom rival Vodafone.
"[T-Mobile] is struggling to define itself, is behind on LTE launches and needs to improve its metrics," Gartner analyst Phillip Redman told eWEEK at the time. "It's a big task for anyone."
While this moment of transition may make Deutsche Telekom more open to an offer, financing remains an issue.
"We've not seen many $10 billion-plus leveraged buyouts anywhere," mergers and acquisitions analysts Tom Taulli told Bloomberg.