Rumors Resurface That T-Mobile Could Be a Takeover Target

The mobile carrier, which Sprint and Iliad eyed for acquisition in 2014, could now be pursued by others, including Altice and Comcast, say analysts.  

T-Mobile acquisition rumors

T-Mobile is again the source of rumors about a possible acquisition, this time by French telecom company Altice, whose chairman made recent comments about getting involved in the mobile market.

The development, reported by FierceWireless on Sept. 17, followed Altice's $17.7 billion deal to buy Cablevision.

"According to posts on Twitter, Altice Chairman Patrick Drahi said at the Goldman Sachs Communacopia conference that he would need to look into moving into the mobile market, and could see Altice owning a mobile network—but that such a move would happen over time and "not next week," according to the article.

T-Mobile had been a takeover target in 2014 of Sprint and by French Internet and mobile operator Iliad, but both deals never solidified. In January, Tim Hoettges, CEO of T-Mobile's parent company, Deutsche Telekom, said in an interview that he thinks that T-Mobile needs a merger partner for long-term survival.

Several IT analysts told eWEEK that an eventual acquisition by a cable or other telecom company could ultimately make sense for T-Mobile and its shareholders.

An Altice deal is a reasonable possibility, said Chris Antlitz, a senior telecom analyst with Technology Business Research, because that company would like to be able to offer wireless services to its customers in addition to its fixed broadband, voice over IP and television services.

"I agree that Altice needs a mobile play to have a true quad-play offer," said Antlitz. The only problem with that strategy now is that Altice has a lot of debt due to recent acquisitions and is likely cash-constrained, he said. "I don't see them being able to take on another big acquisition right now."

What Altice could do instead, he added, is partner with a company like T-Mobile to offer such services.

Elsewhere, though, T-Mobile has a "high probability" of being acquired by other potential suitors nowadays, he said, including Dish Networks or Comcast.

"They have significantly improved their business, and they have a well-defined growth trajectory," he said of T-Mobile. "That makes them very desirable."

For Dish, a T-Mobile purchase "would be a financial stretch," but they could get it done, he said. T-Mobile's market capitalization value is about $35 billion, but the company would likely sell for a premium of some $40 billion, at which point it is likely that a sale would be approved, he added. "At the end of the day, money talks. If they get a good enough offer, they will definitely sell."

Comcast could certainly afford to buy T-Mobile, so that could happen as well, Antlitz said. A third option could be a foreign company that wants to get involved in the United States.

Dish could even skip T-Mobile and go after Sprint, which it would be able to afford more easily, he said.

For any T-Mobile suitor, the lure of the deal is that U.S. regulators have been making it clear that they like mixes of businesses, and not combinations of wireless carriers or cable companies, said Antlitz.

AT&T's move to buy DirecTV this year puts pressure on rivals because such product mixes are what customers want today—to be able to access content across all of their screens, he said. "It is the new table stakes for this market. You need to have all of those bases covered. This is a game-changer. It's pushing the other guys to remain relevant."

Avi Greengart, a mobile analyst with Current Analysis, told eWEEK that "anytime there is talk about acquisitions, T-Mobile is going to come up," especially since its parent, Deutsche Telekom, is looking for an exit. "But T-Mobile has markedly improved its performance in market and network so they are not desperate for a deal."

A possible purchase by Dish makes some sense, said Greengart, because "Dish is clearly looking for a way to work with a network operator and extract the maximum value for the spectrum that it holds. Plus, it would give it a way out of its current business model of satellite TV, which is in long-term decline."

If T-Mobile is acquired, Greengart said he expects that its colorful and shrewd CEO, John Legere (pictured), would likely be retained to run the whole operation due to his successful track record at T-Mobile.

"He was a buttoned-up executive [earlier in his career but] he's chosen to make himself part of the marketing message" for T-Mobile, said Greengart. "There is no question about it that this is working. What's most interesting is his focus on business models, on terms and conditions and changing the way the wireless plans and devices are structured and sold."