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.”
Rumors Resurface That T-Mobile Could Be a Takeover Target
Charles King, principal analyst with Pund-IT, said that the latest rumors about a possible T-Mobile acquisition “also reflect a recognition within the industry that traditional cable services are being threatened and supplanted by wireless media services, particularly in critical younger demographics like 25- to 35-year-olds. Ignoring those trends would be foolish in the extreme, and acquiring a wireless carrier, especially one as dynamic as T-Mobile would provide a great foundation for future development.”
Yet despite the latest merger rumors, King said he thinks that the company would be better off staying independent. “Doing so and partnering with other service providers to develop integrated packages for specific markets could accomplish many of the same goals as being acquired,” he said. “However, managing individual partnerships would also be more complex and fraught with potential problems or failure. In the end, Legere is a businessman and I expect a terrific deal would be difficult to refuse unless he believed better opportunities were on the horizon.”
Jan Dawson, chief analyst for Jackdaw Research, told eWEEK he thinks that acquisition rumors will continue to swirl about T-Mobile until a deal eventually does get done, simply because the company has plenty of interest from others. The company is “sub-scale in the U.S. market, its parent has wanted to sell its holding for quite some time and there are quite a few interested parties around,” said Dawson. “With Altice taking over Cablevision, that introduces another possible acquirer into the mix as well. I don’t see T-Mobile remaining a subsidiary of Deutsche Telekom forever, and I think it’s almost inevitable that they get bought at some point. The big questions in my mind are the identity of the buyer, and the ability of that buyer to drive sufficient synergies to dramatically improve T-Mobile’s margins.”
Rob Enderle, principal analyst at Enderle Group, said he sees T-Mobile as a “bit of a bargain” right now, but he doesn’t expect it to be a cheap target for long. “For a cable firm without a wireless position, they would be an attractive option,” he said. “Long term, I expect T-Mobile will merge to get greater scale. I could also argue that, strategically, T-Mobile would likely be better not merging so they don’t later have to divest the cable business.”
In June, reports also circulated that T-Mobile US was talking with Dish Network about a merger that could finally bring T-Mobile together with a partner. That merger possibility followed the announcement in late May that Charter Communications is acquiring Time Warner Cable, the second-largest U.S. cable company. The Charter-Time Warner deal came just a month after an earlier $45 billion TWC acquisition proposal by Comcast fell apart due to potential roadblocks from federal regulators who were leery of the merger due to concerns about unfair competition and harm to industry innovation.
In early August 2014, Sprint dropped its plans to buy T-Mobile after regulators opposed the move. Sprint had been rumored for months to be seeking a merger with T-Mobile so that the two struggling companies could join together and fight harder to compete with mobile powers Verizon Wireless and AT&T. Neither company ever commented publicly on those rumors until Sprint finally said in August that it was giving up its plans. Following the aborted merger attempt, Sprint then shook up its executive ranks by replacing its CEO, Dan Hesse, with Marcelo Claure, the founder and CEO of Brightstar, a subsidiary of Softbank, Sprint’s parent company.
In December 2014, rumors circulated that Sprint might again try to buy T-Mobile, but the reports were quickly dashed, according to an earlier eWEEK report.